House prices edge up by £2,287 in 'rebound' for property market after inflation plunge

Average house prices increased by 0.4 percent in the UK in May in a modest 'rebound' for the property market, Nationwide has said.

Annually, house price growth has seen a 1.3 percent uptick since last April, with prices now averaging £264,249, up from £261,962.

Commenting on the figures, Robert Gardner, Nationwide's chief economist, said: “UK house prices increased by 0.4 percent in May, after taking account of seasonal effects.

“This resulted in a slight pickup in the annual rate of house price growth to 1.3 percent in April, from 0.6 percent the previous month.

“The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer-term interest rates in recent months. Consumer confidence has improved noticeably over the last few months, supported by solid wage gains and lower inflation.”

Some analysts have attributed the return of buyer's confidence to the prospect of falling interest rates in the months to come.

Alice Haine, a personal finance analyst at Bestinvest by Evelyn Partners, commented: "Britain’s house prices rebounded in May, nudging up by 0.4 percent on the month compared to a drop of -0.4 percent in April.

"After a rocky 2023, confidence returned to the market at the start of 2024 when buyer appetite was boosted by easing mortgage rates and the prospect of several interest rate cuts throughout the year.

"The Bank of England’s Monetary Policy Committee then adopted a ‘higher for longer’ stance at its meetings in the first quarter in the face of stubborn inflation before softening its stance at its most recent meeting in May, raising hopes that a summer rate cut was imminent."

With a snap general election due on July 4, there are questions about whether this will impact the property market.

Having analysed house price movements in the months around previous elections and the 2016 EU referendum, Mr Gardner said: "Past general elections do not appear to have generated volatility in house prices or resulted in a significant change in house price trends.

"On the whole, prevailing trends have been maintained just before, during and after UK general elections. Broader economic trends appear to dominate any immediate election-related impacts."

Guy Gittins, CEO at Foxtons said mortgage approvals have been "climbing consistently" throughout the year and despite last week’s news of a general election, the estate agents saw "weekly new applicant enquiry numbers hit a five-year high".

Mr Gittins continued: “Not only has there been an uplift in buyer activity, but we’re also seeing more sellers return to the fold in order to take advantage of this growing market momentum, with the number of offers being accepted at its highest since 2016.”

Going forward, Mr Gittens said: “We don’t anticipate that the impending general election will dampen this growing market sentiment and we expect further growth will materialise over the summer months as the market continues to heat up, particularly with the possibility of an interest rate cut firmly on the horizon.”

Verona Frankish, CEO of Yopa, commented: “Despite a prolonged period of higher interest rates we’re yet to have seen any notable decline in property values and it seems as though the tide has now well and truly turned, as the market starts to build momentum following a resurgence in market activity so far this year.

"The possibility of a base rate reduction in the coming months will only help to boost current sentiment and we expect the market to march on undeterred by the political noise being generated from the impending election.”

Karen Noye, mortgage expert at Quilter pointed out that the property market remains "unpredictable" and the data still reflects "caution".

Ms Noye said: "Nationwide's data reflects a modestly positive trend, but the housing market remains very unpredictable and the growth in house prices is modest. Monthly property transactions have been lower than expected, indicating a cautious market but this is no surprise given the stress the nation’s finances have been under.

"Attention now turns to the Bank of England’s upcoming monetary policy decision and what it intonates as a plan for the rest of the year. While no immediate changes in interest rates are expected, a future cut could provide a much-needed boost to the housing market.

"Lower borrowing costs would likely stimulate demand, as many prospective buyers are currently waiting for more favourable conditions.”