UK property: Signs of slowdown after 2 years of rise

In 1 year, the average price of a house in the UK has increased by 22%

UK property prices are showing signs of slowing with rising interest rates and the purchasing power crisis, after two years of soaring in the wake of the pandemic.

According to the UK house price index from mutual fund organization Nationwide, published on Thursday, price growth eased to 10% in August from 11% in July, but this remains the 13th consecutive month of increase.

Over the past two years, the average price of a house in the UK has risen by £50,000 to £273,751 (+22% in one year).

The rival index, compiled by property adverts site Rightmove, meanwhile, reports “a fall for the first time this year in the price of properties newly put on the market” in August, although it follows a seasonal trend.

The housing market is losing momentum

“There are signs that the housing market is losing momentum” with less demand from potential buyers and the number of loan approvals for purchases falling below pre-pandemic levels, Nationwide notes.

Robert Gardner, chief economist at Nationwide, explains to AFP that the rise in interest rates in the UK should especially slow down the market for new buyers.

“This is starting to reduce the financial capacity” of first-time buyers, especially as the 10% contribution generally required to get a loan now represents about 60% of annual income on average, a record since the 1980s, Ms Gardner says .

However, this slowdown remains “modest”, particularly due to a persistent deficit in goods, the press release added.

Inquiries to estate agents have weakened in just over a year, but remain 20% higher than 2019 before the pandemic, while available properties are down 39% compared to 2019, Rightmove details.

Inflation of 10% and rising interest rates will weigh on the market

Nationally, however, it expects “the market to slow further as pressure on household budgets intensifies in the coming quarters”, with inflation at 10% set to rise further and interest rates rising. should be raised further by the Bank of England.

Martin Beck, economist at EY Item Club, believes Nationwide’s figures show resilience in the UK market, particularly as “the crisis in the cost of living will hit lower incomes harder”, who often rent their homes more than they don’t buy.

Turning to regions, Mr Gardner notes that price growth in London is lower than elsewhere in the country, at 6% against 11% across the country in the second quarter, because the capital is suffering from a price level that has become unaffordable for many Britons who are moving to other regions.

During the pandemic, the capital had also been fled by many residents in search of more space, especially as telecommuting allows more.

While a slowdown is expected, Mr Gardner points out that Nationwide does not expect a real drop in prices. The last sustained price devaluation for more than a month or two dates back to the financial crisis, when property prices fell by 20%.

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