UK house price growth in May exceeds forecasts

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UK house prices rose more than expected in May, supported by low unemployment, strong wage growth and easing mortgage rates, the lender Nationwide said.

The average cost of a property rose 0.5 per cent between April and May to £273,427, mostly reversing the 0.6 per cent fall in the previous month, according to data released on Monday.

Prices rose at an annual rate of 3.5 per cent, up from 3.4 per cent in the previous month. Both measures are stronger than the 0.1 per cent month-on-month increase and the 2.9 per cent annual rise forecast by economists polled by Reuters.

Robert Gardner, Nationwide’s chief economist, said that, despite economic uncertainties in the global economy, “underlying conditions for potential home buyers in the UK remain supportive”.

“Unemployment remains low, earnings are rising at a healthy pace, household balance sheets are strong and borrowing costs are likely to moderate a little if the bank rate is lowered further in the coming quarters as we, and most other analysts, expect.”

Elliott Jordan-Doak, economist at the consultancy Pantheon Macroeconomics, said the figures suggested “that the worst fears of a slowdown in house price inflation after the stamp duty hike in April will fail to materialise”.

From April 1, the stamp duty thresholds reverted to pre-2022 levels, increasing the tax cost for many property buyers and resulting in many households rushing to complete transactions ahead of the changes.

First-time buyers, for example, will now pay the levy on properties costing £300,000 or more, instead of the previous £425,000.

Jordan-Doak said the economic backdrop had improved over the past month, supporting housing demand, as the UK’s agreement on a trade deal with the US took the worst-case scenario for US tariffs off the table. He expects house prices to rise 4.5 per cent this year.

UK wages have been growing faster than inflation for about two years, while mortgage rates are edging lower.

In May, the Bank of England cut interest rates by a quarter point for the fourth time since the middle of last year, to 4.25 per cent. Markets expect the BoE to cut by another quarter point before the end of this year.

Jonathan Hopper, chief executive of investment services company Garrington Property Finders, said that with the distorting effects of March’s stamp duty changes in the past, “the market is returning to a more settled dynamic, in which prices are once again being determined by the interplay of supply and demand”.