Against the backdrop of a global energy crisis and a recent change in government, UK homebuyers have shown more resilience than anticipated. A modest increase in house prices was recorded in July, the first in three months, signaling a tentative return to balance in the housing market.
Stability in a Time of Change
According to Nationwide Building Society, the average price of a home rose to £277,542, in line with what economists had predicted. Nathan Emerson, CEO at Propertymark, noted that the steady house prices reflect a market adjusting to ongoing economic and political shifts.
Lenders and Buyers in a Tug of War
Despite this positive sign, the housing market remains fragile. Mortgage rates are still 0.8 percentage points higher than before the Iran war, with no clear path to recovery in energy supplies. The breakdown of a US-Iran truce has made an energy crisis more likely.
Recent surveys by the Royal Institution of Chartered Surveyors show that property agents are witnessing fewer inquiries from buyers and are bracing for weaker prices and sales in the near future. The early rush to secure mortgage deals has faded, with fixed rates still elevated at 5.62%, as noted by Moneyfacts.
Robert Gardner, Nationwide’s chief economist, acknowledged the challenges: 'Geopolitical tensions remain high, with the conflict between Iran and the US again exerting upward pressure on energy prices and market interest rates in recent weeks.' House prices rose by just 0.1% in July from a month earlier, with annual price growth slowing to 1.8% this month, down from 2.2% in June. The UK’s biggest building society said the price of an average home edged slightly higher in July to £277,542, up from £277,484 the previous month. However, this is still lower than the average price recorded in May, when it rose above £278,000.
Gardner added: 'Financial market expectations for the future path of Bank Rate have been volatile, reflecting shifting views about the inflationary implications of events at home and abroad.' The Bank of England kept interest rates on hold at 3.75% on Thursday, but warned that a further escalation of the Iran war could push inflation above 4% next year, adding to cost-of-living pressures on households.
The UK housebuilder Taylor Wimpey warned of 'challenging' market conditions as it reported its results for the first half of the year, saying it was facing weaker demand from buyers at the same time as rising building costs. As a result, it expects to complete between 10,600 and 10,800 homes this year, at the lower end of the range announced in March. Shares in Taylor Wimpey fell almost 6% in early trading. Amy Reynolds, head of sales at London-based estate agents Antony Roberts, said: 'In our offices, prices remain flat with sensible offers being accepted. There are more sellers than buyers, but sellers aren’t panicking – asking prices are coming down, but a lot of that is simply initial overpricing meeting the time it takes to find the market level.'