Brits warned of cooling housing market as prices flatline

UK house prices flatlined in June, with a 0% monthly change, as buyers held back amid uncertainty over interest rates and affordability.

Annual house price growth edged up to 2.2% in June, from 1.7% in May, according to the latest Nationwide house price index. The average UK home was valued at £277,484, little changed on the previous month.

Robert Gardner, Nationwide’s Chief Economist, said the softening was unsurprising given the wider backdrop.

“Annual house price growth picked up to 2.2% in June, from 1.7% in May, although prices were broadly flat in month-on-month terms, after taking account of seasonal effects.

“It is not surprising that the market has softened a little in recent months, given the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices and market interest rates. Indeed, consumer confidence and measures of housing sentiment have weakened, and mortgage approvals fell noticeably in May.”

Gardner said the signing of a memorandum of understanding between Iran and the US had helped push oil prices back towards levels seen before the conflict began.

If the energy shock continued to subside, he said, the Bank of England may not need to raise interest rates, or may do so by less than previously expected.

Northern Ireland leads, while southern regions lag

Every one of the UK’s thirteen regions recorded positive annual growth in the second quarter, but the spread was wide. Northern Ireland was again the standout, with prices up 8.6% year on year to an average of £226,699 – around four times faster than the 2.2% recorded across the UK.

At the other end, the Outer South East was the weakest performing region, with prices rising just 0.1% to an average of £341,175. London remained the strongest southern region, though its annual growth eased to 1.6% from 1.7% in the prior quarter.

Ian Futcher, Financial Planner at Quilter, warned that momentum had been significantly dampened and that the effects of the Middle East conflict would not clear quickly.

““Market momentum has been significantly dampened in recent months as the situation in the Middle East continued to evolve. The pressure it has placed on energy prices and inflation, combined with the resulting uncertainty around the path of interest rates and broader affordability challenges, has made prospective buyers much more cautious,” he said.

Futcher said recent data already pointed to a cooling market, with property transactions edging lower in May and Bank of England figures showing weaker mortgage borrowing and fewer approvals for house purchases.

He said many prospective buyers were continuing to delay major financial commitments while confidence remained fragile and borrowing costs uncertain.

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