SUMMARY

House prices grew by 0.7% in June according to Nationwide. This takes annual UK house price growth to 13.4%, the highest year-on-year rise since November 2004. The strongest annual growth to Q2 was in Wales at 13.3%, followed by Yorkshire & Humber at 13.0%. Scotland was the weakest region at 7.0%, while the weakest growth in England was in London, at 7.2%. Strong sentiment of inflating house prices was reflected in June’s RICs survey (+83), the highest reading since 1988.

Buyer demand has cooled over the last few months but remains above ‘normal’ levels. The majority of surveyors in the RICS survey for June still reported rising numbers of new buyer enquiries, albeit the majority was smaller than in March, April and May. This aligns with the moderation in buyer demand reported by Zoopla in June, as the extended SDLT holiday neared its end.

There is also a growing shortage of supply. A majority of surveyors reported falling levels of new instructions in June. And Zoopla found that stock of homes for sale was down 24% in the year to mid-June, compared to the average in 2020. 

This lack of supply coupled with strong demand has resulted in the fastest moving market in at least five years. Homes sold on average in 22 days in May, almost half the average of 42 days in May 2019, according to Zoopla. This undersupply will help maintain value growth, but could hold back total activity levels.  

Fears of a spike in inflation has prompted some concern that interest rates could rise, and in turn squeeze mortgage affordability. Oxford Economics predicts only a short-lived jump in inflation however, expecting no change in the base rate until 2023. Assuming any inflation spike is indeed transitory, this should keep rates low and attractive to those with sufficient equity.  

The average UK rent increased 1.2% over the year to May, according to the ONS. Rents grew the most in the East Midlands and the South West, up 2.4% and 2.3% respectively, and least in London, where they fell marginally by -0.1%.

Annual house price growth in March was strongest in Neath Port Talbot in Wales, at 13.7%, followed by Scottish Borders at 13.2%. Just 4 local authorities across the UK saw house price falls, including Aberdeen (-1.3%) and Westminster (-0.3%).