House prices in the UK dipped slightly by 0.2% in August, yet remain 2.4% higher than they were a year ago, according to the latest data from Nationwide. Despite this minor decline, the market is showing signs of resilience, with average house prices now at £265,375, just 3% below the record highs seen in summer 2022.
Housing market steadies amidst economic challenges
While the current house price growth may seem modest, it is the fastest rate of increase since December 2022. Robert Gardner, Nationwide’s chief economist, highlighted the market’s stability, stating: “House price growth and activity remain subdued by historic standards, but they nevertheless present a picture of resilience in the context of the higher interest rate environment and where house prices remain high relative to average earnings.”
Gardner remains optimistic, expecting a gradual improvement in market activity as economic conditions improve: “Providing the economy continues to recover steadily, as we expect, housing market activity is likely to strengthen gradually as affordability constraints ease.”
Buyers take a summer break but likely to return
August often sees a seasonal slowdown in housing market activity, and this year was no exception. Sarah Coles, head of personal finance at Hargreaves Lansdown, observed: “In August, people are always more interested in packing suitcases than boxes, so buyers tend to be thin on the ground.” However, she expects the market to pick up in September as slight improvements in affordability draw buyers back.
Coles added that while the changes in affordability are minimal, they are still enough to encourage potential buyers. She noted, “With every month that wages outpace house price growth, it makes it easier for people to borrow what they need.”
Uncertainty around the Autumn Budget
The upcoming Autumn Budget could play a significant role in influencing buyer behaviour in the coming months. Nathan Emerson, CEO of Propertymark, emphasised the importance of government action: “When politicians return from their summer recess in September, it is essential to see progression in delivering nearly two million homes across the next parliamentary term as promised by the UK Government.”
Concerns about potential tax rises have led some buyers to adopt a cautious approach, choosing to wait and see how the Budget unfolds. However, Coles advises that those taking a pause should use the time to prepare, such as ensuring their savings are in a competitive account and reviewing their mortgage options.
As the housing market continues to navigate economic uncertainties, the gradual easing of affordability constraints could provide a boost, encouraging buyers to re-enter the market and potentially drive prices up in the months ahead.
