As household budgets are squeezed tighter, house prices continue to climb.
The average price tag on a home has been jumping to record highs for four months in a row, according to property website Rightmove (rightmove.co.uk).
The property website says the average asking price for a home in May was £367,501 – £7,400 more than it was in April. Over the past two years, the average asking price has soared by more than £55,000.
Sellers don’t always get what they ask for – but many homes are being bought at or above the price they had in mind.
According to Propertymark (propertymark.co.uk), 82% of property agent members surveyed reported most properties were sold at or above the asking price in April, compared with 17% pre-pandemic in April 2019.
Robert Gardner, Nationwide Building Society’s chief economist (nationwide.co.uk), says: “It is surprising housing market conditions have remained so strong in recent months – since higher property prices and interest rates, together with steep increases in the cost of living, mean housing has become less affordable.
“Despite consumer confidence declining towards the lows seen during the global financial crisis, monthly mortgage approvals for house purchase are still above pre-pandemic levels.”
So why are house prices continuing to climb higher, despite tough economic conditions putting such a significant financial squeeze on households?
One major factor is a relatively high number of buyers chasing a low number of available properties. Propertymark says the average number of new potential buyers registering at each member branch was 100 in April – compared with an average of 20 properties listed.
Gardner says a Nationwide survey carried out in April points to a strong urge to move, with 38% of respondents saying they were either in the process of moving, or considering a move: “A high proportion when you consider that only around 5% of the housing stock turns over in a typical year,” he adds.
He suggests this desire to move is largely driven by the pandemic. “For example, in our survey 15% cited a desire to access to garden or more outside space as a reason for moving,” he says.
So will house prices keep shooting up? Gardner says: “The outlook is unusually uncertain, but we expect housing market activity and house price growth to moderate in the coming quarters.
“The squeeze on household incomes is set to intensify, while financial markets point to further increases in interest rates ahead which, if realised, would also exert a cooling influence on the market.”
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