- Average house prices rose just 1.7% in the year to May – down from 3% a month earlier (source: Annual house price growth slows in May | Nationwide)
- They dropped 0.6% in a month to £278,024
- Housing market beginning to struggle in the face of headwinds
Sarah Coles, head of personal finance at AJ Bell, comments:
“Global turmoil is taking a toll on the property market. House prices fell between April and May and are up just 1.7% in a year. It’s a valuable reminder that property investments aren’t always safe as houses.
“The Nationwide House Price Index only provides a partial picture of the market, but it’s particularly timely, because it looks at prices at the point of mortgage approvals – months ahead of the completion data we get from the Office for National Statistics.
“We can see the market is starting to struggle in the face of some tough headwinds. Falling consumer confidence, rising unemployment, higher mortgage rates and fears of rising prices are denting buyer enthusiasm. The fact there are fewer buyers around is encouraging people to negotiate hard, so average prices are falling.
“There’s every chance the property market has a tough few months ahead. The progress of peace talks in the Middle East is impossible to forecast, but even if there was a resolution in the near future, oil shortages are likely to keep prices higher, pushing up inflation as we go through the summer. If we get the interest rate rises the market is expecting, mortgages may well remain elevated, putting affordability under pressure.
“In a slower market, where prices are as likely to fall as to rise, it puts real pressure on downsizers. For anyone who has considered their property as at least part of their retirement income, it could mean some recalculation and some difficult choices. For anyone planning to sell an investment property as they go through retirement, this could throw a spanner in the works. Periods like this are why property can’t reliably lie at the heart of retirement planning, as your investment is highly concentrated and illiquid. It’s why Plan A should always involve robust pension contributions."
