House prices rises defy gravity – but for how long?

Almost half of private rental tenants are in the process of moving or are considering a move.

So said the Nationwide on the basis of its survey of around 3,000 consumers across the UK. This concluded that 38 per cent of all those who responded were currently considering a move. Some 30 per cent of those who owned their own home outright and 42 per cent of those with a mortgage fell into this category, along with 45 per cent of private renters and 44 per cent of those currently living with their family.

Nationwide conducted the survey to better understand why the housing market remains so buoyant despite mounting pressure on household finances.

Its April house price survey puts the annual rate of house price inflation at 12.1 per cent. The was only ‘modestly’ down on the 14.3 per cent rate in March.

Part of the conundrum seems to be that as well as Covid, many people have caught the moving bug. The share of people moving or considering a move is now higher across all types of tenure than during the height of the Covid pandemic in April last year, said Nationwide.

The proportion on the move was particularly high in London, where almost half said they were moving or considering a move. But even in Wales, where the share was lowest, more than 25 per cent were either moving or considering a move – very high, given that the UK turnover in housing stock is only about 5 per cent in an average year.

‘Housing market activity has remained solid with mortgage approvals continuing to run above pre-Covid levels, said Nationwide’s chief economist Robert Gardner. ‘Demand is being supported by robust labour market conditions, where employment growth has remained strong and the unemployment rate has fallen back to pre-pandemic lows. With the stock of homes on the market still low, this has translated into continued upward pressure on house prices’.

But there are storm clouds gathering. The Bank of England this week increased the Bank Rate to 1 per cent, which will surely have a knock-on effect on mortgage rates. Its monetary committee voted by six to three for the rise. Those who voted against wanted an even higher increase.

The Bank estimates that inflation, currently at 7 per cent, will reach 10 per cent by the end of the year.

In noting his ‘surprise’ at the buoyancy of the housing market, Gardner noted that consumers’ expectations of their own personal finances over the next twelve months had ‘dropped to levels last seen during the depths of the global financial crisis more than a decade ago’. Moreover, he said, ‘housing affordability has deteriorated because house price growth has been outstripping income growth by a wide margin over the past two years, while more recently borrowing costs have increased (though they remain low by historic standards)’.

Nationwide continues to expect the housing market to slow in the quarters ahead, he said.

This is even more likely given the Nationwide’s finding that 70 per cent of hopeful first-time buyers have already decided to delay their purchases for an average of two years. A fifth said they are pressing pause on their homeownership aspirations for more than three years.

The figures are based on a survey of 2,000 people looking to buy their first home within the next five years.

Putting together enough money for a deposit was said to be the biggest hurdle to home ownership. And 88 per cent of those surveyed said their ability to save for a deposit had been impacted by the rising cost of living.