According to the latest data from Nationwide, the average price of a home has risen by 0.5% in April 2023, representing the first increase in growth rate in last eight months.
The Nationwide report also reveals that the average UK house price as of April 2023 now stands at £260,441, up from £257,122 just a month ago. The annual price of real estate was down 2.7% in April compared 3.1% in March and is still 4% below its August 2022 peak.
Robert Gardner, Nationwide’s Chief Economist, pointed out that the data from the Bank of England indicated that the start of the 2023 housing market was weak, with 43,500 approved house purchase mortgages in February, which is nearly 40% below the prevailing a year ago and around a third below pre-pandemic levels. However, industry data on mortgage applications in recent months indicate a sign of recovery.
He stated that the confidence in the property market stems from people’s perceptions of their own financial situation over the coming year and broader economic conditions have both significantly improved in recent months. Any further decline in inflation in the second half of the year would likely boost confidence even further, especially if labour market circumstances remained favourable.
“This, in turn, would also be likely to support a modest recovery in housing market activity. But any upturn is likely to remain fairly pedestrian, as it will take time for household finances to recover, since average earnings have been failing to keep pace with inflation, and by a wide margin over the last few years” Mr Gardener said.
Future changes in the Bank Rate will have an impact on fixed mortgage rates. The Liz Truss’s mini budget of 2022 sent the mortgage interest rate up. The mortgage interest rate has doubled from the level prevailing a year ago, while the bank of England increased interest rate to 4.25% in an effort to reduce the rising inflation, which currently sits at 10.1%.
However, the rise in house prices has raised concerns over affordability, particularly for first-time buyers. The Office for National Statistics reports that the average a full-time worker is expected to spend 8.3 times their annual income to buy a home and the average income for first-time buyers has not kept pace with the rise in house prices, leading to an affordability gap. The situation is particularly acute in London and the Southeast, where house prices are significantly higher than the national average.
While the increase in house prices is great news for homeowners and investors, it can be daunting for those looking to get on the property ladder for the first time. And, if the Bank of England increases the base rate in the coming months, borrowing could become more expensive. One option for first-home buyers is to wait for a downtrend.
On the other hand, the increase in property prices also offers a chance for individuals seeking to invest in real estate through Individual Savings Accounts (ISAs) or REITs. People can capitalize on the growth potential of the property market, without having to buy a physical property themselves. Moreover, first-time buyers who are saving for a deposit on a property can take advantage of the LISA, a government’s Help to Buy scheme, which provides a 25% bonus on savings up to £1,000 per tax year.
It remains to be seen how the UK housing market will fare in the coming months and years, but the recent increase in house prices is certainly a positive sign for the industry. Overall, it appears that the UK property market is likely to continue to be a popular choice for investors, particularly those looking for a long-term investment option.