14 August 2024
If you are covering the latest Government House Price Index, please see the following comment from Holly Tomlinson, financial planner at Quilter:
"Today’s Government House Price Index presents a picture of a UK property market that is gradually picking up steam, despite facing challenging economic conditions. House prices rose by 0.5% from May to June 2024, contributing to an annual growth rate of 2.7%, with the average UK property now valued at £288,000. This steady, though modest, growth suggests that while the market is on an upward trajectory, it is doing so cautiously, reflecting the broader economic uncertainties at play highlighted by the slight rise in inflation just this morning.
"The Halifax House Price Index released last week for July underscored this momentum, pointing out that the market, after three relatively flat months, is beginning to heat up—particularly during what is traditionally a busy summer period for property transactions.
"The recent decision by the Bank of England to cut its base rate from 5.25% to 5% is expected to further stimulate the market, although the immediate financial impact on homeowners, especially those with fixed-rate mortgages, may be limited. However, the psychological effect of this rate cut cannot be understated. It boosts buyer and seller confidence, potentially encouraging more people to enter the market. This renewed confidence could lead to a busier-than-expected autumn, as more buyers feel ready to commit and sellers decide that now is the right time to list their properties.
"However, this optimism is tempered by the ongoing challenges faced by prospective buyers, particularly first-time buyers. While existing homeowners may welcome the rise in house prices, it continues to make homeownership increasingly difficult for those trying to get onto the property ladder. The disconnect between wage growth and house price inflation remains a significant barrier, with many relying on family support or delaying their purchase until much later in life. This issue highlights a broader challenge for the government, as addressing the supply and demand dynamics in the housing market is only part of the solution; the deeper issue lies in ensuring that wage growth keeps pace with rising property values, which is no mean feat.
"As we move into the latter half of the year, the market’s response to these conditions—particularly in light of recent interest rate cuts—will be crucial in determining whether this upward trend continues or if new challenges emerge. Overall, the housing market appears poised for a potential uptick, but the situation remains fluid, with prospective buyers and sellers needing to carefully consider their options in a market that is both promising and unpredictable."
