UK House Prices Rise in May Amid Wage Growth and Falling Inflation

Nationwide's latest data shows UK house prices increased in May, driven by wage growth and falling inflation, providing a boost for potential buyers.

House prices in the UK saw a rise between April and May, as reported by Nationwide's latest data. The building society attributed this increase to wage growth and falling inflation, which helped to offset the impact of higher mortgage rates for potential buyers. According to Nationwide, the average UK home experienced a 0.4 per cent increase in value in May, following a 0.4 per cent decline in April. When adjusted for seasonal effects, the rise would have been 0.9 per cent. In real terms, the average house price went up from £261,962 in April to £264,249 in May, with year-on-year figures showing a 1.3 per cent increase.

Despite ongoing affordability pressures due to rising longer term interest rates in recent months, the housing market has displayed signs of resilience. Consumer confidence has been on the rise, supported by solid wage gains and lower inflation. However, the recent announcement of the UK general election on 4 July has raised questions about its potential impact on the housing market. Past general elections have not significantly altered house price trends, with prevailing trends typically remaining consistent before, during, and after elections.

Zoopla recently reported that the number of homes on the market has reached an eight-year high, with the average agent having 31 homes for sale, a 20 per cent increase from the previous year. This surge in available supply is expected to prevent further increases in house prices this year. The property industry anticipates that cuts to the Bank of England's base rate, rather than the general election, will have a more significant impact on the housing market.

Despite a period of higher interest rates, property values have remained stable, with market activity showing signs of resurgence. The possibility of a base rate reduction in the coming months is expected to boost market sentiment and drive continued growth. With inflation nearing the government's target and potential interest rate cuts on the horizon, demand for housing is expected to increase, potentially leading to a rise in prices, particularly in popular areas and hot markets.

Overall, the UK housing market is poised for a steady rebound, with prices expected to rise moderately in certain regions. Lenders are responding to favorable conditions by lowering rates, making homeownership more accessible, especially for first-time buyers. If current trends persist, the market could experience a positive trajectory in the coming months.

The housing market in the UK has shown resilience in the face of economic uncertainty, with factors such as wage growth, falling inflation, and increased supply contributing to stability. While the upcoming general election may introduce some uncertainty, past trends suggest that the market will likely remain steady.