"While the wider UK economy may be wobbling like a homemade Jubilee trifle, the housing market is standing firm, with property values continuing to climb."
May saw a slight slowing in the rate of annual house price growth to 11.2%, from 12.1% in April. Prices rose by 0.9% month-on-month, after taking account of seasonal effects.
Robert Gardner, Nationwide's Chief Economist, said: “Despite growing headwinds from the squeeze on household budgets due to high inflation and a steady increase in borrowing costs, the housing market has retained a surprising amount of momentum. Demand is being supported by strong labour market conditions, where the unemployment rate has fallen towards 50-year lows, and with the number of job vacancies at a record high. At the same time, the stock of homes on the market has remained low, keeping upward pressure on house prices.
“We continue to expect the housing market to slow as the year progresses. Household finances are likely to remain under pressure with inflation set to reach double digits in the coming quarters if global energy prices remain high. Measures of consumer confidence have already fallen towards record lows. Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates."
Director of Benham and Reeves, Marc von Grundherr, commented: “While the wider UK economy may be wobbling like a homemade Jubilee trifle, the housing market is standing firm, with property values continuing to climb.
"This suggests that buyers are making the most of what remain relatively favourable market conditions, despite a string of successive base rate increases, no doubt in anticipation of further rises to come this year.”
James Forrester, Managing Director of Barrows and Forrester, said: “Despite rising inflation, the cost of living crisis and increasing interest rates, the UK property market remains defiant and it’s fair to say that the pandemic property market boom has now become the post-pandemic norm, with property values standing steadfast in the face of wider economic instability.
"As a result, many homeowners are deciding to improve rather than move in order to boost the size of their homes to accommodate their lifestyle needs.
"This is only going to limit the already inadequate level of housing stock available to buyers on the current market, which will ensure that, even with a reduction in buyer demand, house prices remain buoyant for the foreseeable future.”
Sundeep Patel, director of sales at specialist lender Together, added: “We saw house prices increase by just 0.9% month-on- month in May, a previously red hot housing market now beginning to cool as rising inflation and the cost of living crisis hit disposable incomes.
“There are increasing signs that the market is becoming more sluggish as people grapple with this significant squeeze on their spending, making it increasingly difficult for first time buyers and home movers to get onto – or move up – the property ladder.
“Renters are also feeling increased pressure with average UK rental growth the highest since the global financial crisis making it hard for those who want to buy their own home to save for a deposit.
“In this testing financial climate, stretched consumers may be shifting their priorities and only spending on the essentials, which may mean a slowdown in market activity in the coming weeks and months.”
