The UK housing market registered a modest rise in May, with average property values climbing 0.5% on a seasonally adjusted basis, according to the latest Nationwide House Price Index.
Annual growth in house prices also picked up slightly to 3.5%, from 3.4% in April, reflecting a cautious but sustained recovery across the sector.
The average UK home is now valued at £273,427, up from £270,752 a month earlier. Nationwide’s index rose to 542.7 in May, reversing part of April’s 0.6% decline, and signalling a degree of underlying resilience in the face of lingering economic headwinds.
Robert Gardner, Nationwide’s chief economist, reckons that the improvement reflects a solid foundation beneath the market’s surface.
STAMP DUTY RUSH
He says: “Unemployment remains low, earnings are rising at a healthy pace – even after accounting for inflation – household balance sheets are in good shape, and borrowing costs could ease if the Bank of England reduces rates further in the coming quarters.
The figures follow a sharp increase in transaction activity in March, when completions by owner-occupiers surged to levels last seen in mid-2021.
Many buyers were incentivised to finalise purchases before the expiry of temporary stamp duty reductions, temporarily boosting the market.
While the stamp duty effect has since faded, Gardner says that demand has not fallen away entirely.
“The market appears to be adjusting, rather than stalling,” he adds.
URBAN-RURAL DIVIDE WIDENS
Nationwide’s latest data also highlights pronounced regional disparities. Since December 2019, house prices in predominantly rural areas have jumped by 23%, compared with an 18% rise in urban locations.
Although the pandemic-era rush for space and greenery has subsided, rural markets continue to outperform.
Nationwide’s special report shows that lifestyle shifts prompted by hybrid and remote working patterns have left a lasting imprint, especially among older homeowners.
The building society’s survey of recent movers over the past five years found that while most relocations occurred within the same type of area, a net movement toward rural living persists. Some 9% of respondents moved from towns or cities to the countryside, compared with 7% moving in the opposite direction.
Age remains a key factor: movers aged 55 and above were significantly more likely to head for rural settings, while younger cohorts continued to favour urban hubs, particularly for employment and lifestyle reasons.
CAUTIOUS OPTIMISM
Looking forward, the market’s trajectory remains finely balanced. While further interest rate cuts could provide additional support, broader affordability challenges and economic uncertainty continue to act as a drag on price momentum.
Still, Gardner remains cautiously optimistic: “Barring any major economic shocks, the housing market should continue to navigate the current adjustment phase with a degree of stability.”
INDUSTRY REACTION
David Johnson, Managing Director of property consultancy INHOUS, says: “Buyer demand picked up immediately after the bank holidays and has remained strong throughout May.
“This level of buyer motivation has resulted in the majority of sellers receiving multiple offers and achieving their asking price.
“One and two bedroom apartments remain particularly sought-after as well as larger family homes in and around commuter hotspots.”
MARKET EQUILIBRIUM
Iain McKenzie, CEO of The Guild of Property Professionals, says: “The Nationwide figures, showing a marginal uptick in annual house price growth to 3.5% and a 0.5% monthly rise, paint a picture of a market steadily finding its equilibrium.
“While modest, this sustained growth underscores a quiet confidence returning, despite the mixed economic signals.
“As ever, there are competing forces at play.
“The recent interest rate cut by the Bank of England to 4.25%, coupled with falling mortgage rates and more flexible lending criteria, is undoubtedly supporting buyer confidence.
“Sub-4% mortgage deals are now a reality for many with strong loan-to-value positions, and with swap rates improving, we expect this to gradually open the door to more buyers. These shifts are easing affordability pressures and encouraging market participation.
“Global uncertainty and a still-subdued economic outlook will likely prevent runaway growth.”
“Global uncertainty and a still-subdued economic outlook will likely prevent runaway growth. For now, we anticipate a steady, measured trajectory for house prices in the months ahead rather than a sharp upward curve.
“Stock levels remain at a 10-year high for this time of year, meaning that while seller sentiment appears strong, pricing realism is key. With more choice available to buyers, correctly pricing from the outset is essential to attract attention and secure sales.
“After the surge in transactions earlier this year, driven by the stamp duty deadline, April’s drop in sales was expected.
“It’s likely we’ll see a short period of adjustment, but agent sentiment, as captured in the latest RICS data, suggests optimism for the second half of the year. Demand is proving resilient and the average time to sell is falling, both signs of a market moving in the right direction.”
CHANGING DYNAMICS
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The historically-accurate Nationwide house price index was one of the first to reflect the change in market dynamics since the stamp duty holiday ended in March.
“But now it is showing that activity has settled since that time with the significant increase in supply, which now comfortably exceeds demand, keeping prices in check.
“Underlying confidence too has not disappeared as these latest figures evidence.
“Buyers and sellers are coming to terms with the ‘new normal’ as employment strength outweighs economic worries and doing their best to keep deals alive.”
PLENTY OF ACTIVITY
Jason Tebb, President of OnTheMarket, says: “Even though a considerable number of buyers brought forward transactions to take advantage of the stamp duty concession before it ended in March, there is still plenty of activity in the market now the incentive is no longer available.
“Average house prices remain relatively steady although there are regional differences and an urban/rural divide exacerbated by the pandemic.
“With the stamp duty holiday no longer available, other inducements, such as interest rate reductions, are even more essential.
“Four quarter-point base-rate cuts since last August have noticeably boosted buyer and seller confidence. Further reductions will give added impetus to the market as we move into summer and the rest of the year.
“Affordability pressures remain, despite rate reductions, with inflation proving stubborn and the high cost of living. Lenders have been trimming mortgage rates and easing criteria in recent weeks which should help a little, giving buyers who rely on mortgages more wiggle room.”
STRONG APPETITE
Jean Jameson, Chief Sales Office for Foxtons, says: “The market continues to make positive strides forward, with the rate of house price growth accelerating on both a monthly and annual basis.
“This momentum has only intensified following a renewed wave of buyer and seller activity as the stamp duty dust has settled, strengthening what has so far been a very busy first half of the year for the UK property market.
“Whilst the expectation is that the Bank of England will hold the base rate at 4.25% this month, a heightened degree of mortgage provider competition has driven down rates in recent months and so we can expect buyer appetites to remain strong.”
BACK TO BUSINESS
Marc von Grundherr, Director of Benham and Reeves, says: “Whilst we saw the market take a momentary pause for breath following the stamp duty deadline, it’s clear that it’s back to business as usual, with the monthly rate of decline seen last month reversing and the annual rate of growth also accelerating in May.
“This was always to be expected and, so far, predictions of a positive year for the property market are ringing true, as we’re seeing consistently strong growth in mortgage approval volumes, more deals done and a strengthening in property values.”
KEEN TO TRANSACT
Verona Frankish, Chief Executive of Yopa, says: “Not only has the market benefited from a degree of post-stamp duty deadline stability, but the reduction in the base rate seen at the start of May has also helped to drive buyer activity, as those looking to make their move continue to benefit from improving affordability where mortgage rates are concerned.
“Whilst the general expectation is that the base rate will be held this month, this is unlikely to deter the nation’s homebuyers, who remain keen to transact despite interest rates sitting higher than they may have become accustomed to in recent years.”
STABLE VOLUMES
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says: “Since the end of the stamp duty holiday, we have seen stable transaction volumes reflecting the ongoing resilience of the housing market despite continued economic uncertainty.
“We’re seeing a flight to quality – buyers are more selective and price-sensitive but still transacting where values align with lifestyle.
“It’s also clear that while high mortgage rates have cooled the market, demand remains underpinned by low supply in many areas.
“The key challenge is affordability. Mortgage rates, higher stamp duty and, for some, the increased cost of private school fees, is affecting many families who would like to move, but are unable to.”
CONSISTENT GROWTH
Nathan Emerson, Chief Executive at Propertymark, says: “It is reassuring to witness consistent house price growth and a strong appetite as people continue to approach the homebuying and selling process, especially when the UK economy continues to adapt to both domestic and international events.
“With the rate of inflation still very much in sharp focus, it will be interesting to see what direction of travel the Bank of England may take regarding base rates when they meet again next week.
“Ultimately it would be welcome news for consumers should there be any further base rates cuts, however the Monetary Policy Committee will likely be approaching any decision with extreme caution, especially considering many economists are predicting inflation to further rise.”
