The United Kingdom’s housing market exhibited signs of resilience in May as house prices experienced an annual growth of 1.3%, according to the Nationwide House Price Index released on Friday.
On a monthly basis, the index recorded a 0.4% rise, with the average house price climbing to £264,249 from £261,962 in April.
Market stabilizes amidst high borrowing costs
The increase in house prices comes after a two-month period of declining values, signaling a potential stabilization in the market despite high borrowing costs.
The 0.4% rise in May was double the 0.2% gain anticipated by economists and marked the strongest monthly increase since February.
Nationwide’s Chief Economist, Robert Gardner, noted that the market is demonstrating resilience in the face of ongoing affordability pressures due to rising longer-term interest rates.
He attributed the improved market conditions to enhanced consumer confidence, which has been bolstered by solid wage gains and lower inflation.
The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer-term interest rates in recent months.
“Consumer confidence has improved noticeably over the last few months, supported by solid wage gains and lower inflation,” Gardner stated.
Impact of upcoming general elections
Gardner also addressed the potential impact of the upcoming general elections scheduled for July 4, stating that historical data suggests elections do not significantly influence house price trends.
Past general elections do not appear to have generated volatility in house prices or resulted in a significant change in house price trends.
The Nationwide report aligns with other indicators showing that 95% of people planning to move home do not anticipate the election affecting their plans, according to Rightmove.
Competition Authority launches merger inquiry
In addition to the latest house price data, the UK’s competition authorities have launched a merger inquiry into Nationwide’s £2.9 billion takeover of rival Virgin Money (LON:VMUK).
The Competition and Markets Authority (CMA) is examining whether the merger would substantially lessen competition within the UK banking sector.
The CMA is currently seeking views from interested parties, with a deadline for submissions set for June 14.
Despite some investor concerns that the takeover might undervalue shareholders, Virgin Money’s shareholders have voted in favor of Nationwide’s offer.
Broader economic context and living standards
The slight increase in house prices contrasts with the broader economic context of stagnating living standards in the UK.
According to the Institute for Fiscal Studies (IFS), median incomes grew by just 6% between 2009-10 and 2022-23, far below the 30% growth that economists would have expected prior to the 2008 financial crisis.
Mubin Haq, chief executive of abrdn Financial Fairness Trust, emphasized the ongoing challenge of low living standards, stating,
Unfortunately, living standards have languished for more than a decade. On a range of measures UK performance has been weak, especially in comparison to other wealthy countries. The danger is that stagnation becomes the new normal. This is in no one’s interests and stunts too many futures and too many lives.
This article first appeared on Invezz.com
