House prices grew by 0.4% in May, taking annual growth to 1.3%, according to Nationwide. This return to monthly growth, following two months of price falls, suggests the market has been resilient in spite of the ongoing high cost of borrowing.

Price growth will remain muted until there are additional mortgage rate cuts. Mortgage interest rates have been relatively unchanged in recent weeks in spite of a slight increase to swap rates. This stability has given some reassurance to buyers, but lower rates will be necessary to bring more demand back to the market. 

Lower mortgage rates are dependent on base rate cuts. Inflation data for April was higher than many economists expected, at 2.3% according to the ONS. This has delayed expectations of the first base rate cut by the Bank of England (BoE). Oxford Economics now expect this to come in August, rather than June, with just one additional cut in 2024.  

Clarity over the path of interest rate falls will have a bigger impact on the market than the General Election. At the time of writing, there are no emerging policies from the major parties that are likely to disrupt the mainstream housing market.

Supply has increased as sellers return to the market but demand held steady. The number of surveyors reporting increased supply rose to the highest level since September 2020, according to the April RICS survey. Zoopla have also reported the highest number of homes for sale in the last eight years. This will limit upward pressure on house prices until demand strengthens.

Sales activity is close to pre-pandemic levels. Mortgage approvals stayed level in April, according to the BoE, at 94% of their 2017-19 average. The boost to agreed sales at the start of 2024 is now showing in the number of completed transactions, which grew to 92% of 2017-19 levels, according to HMRC. This is likely to further improve as sales agreed in May were 10% above their 2017-19 average according to TwentyCI data.

The majority of local areas continued to see annual house price falls in the more lagged Land Registry data. Scotland remained the only region with positive annual growth of 1.5% in February 2024. Resilient local markets which have seen the highest annual growth include Inverclyde (7.6%), Angus (4.7%), and Glasgow (4.6%). The biggest falls were in markets which saw strong growth during the pandemic.

Annual rental growth across the UK in April was 6.6% according to Zoopla, down slightly from 6.7% in March. The North East is now the region with the strongest annual growth (9.5%), overtaking Scotland (9.3%). There is significant variation within these regions, with areas adjacent to large cities such as Midlothian and North Tyneside seeing rental growth accelerating while others mirror the regional averages more closely.