Nationwide HPI May 22

During May 2022 the property market continued on almost undeterred by rising rates, inflation and costs of living. This is partly due to the fact we are still sitting in a time lag zone, where the full impact of these economic stressors has not filters through to data. I would expect some property slow down in the coming months, but do not feel we have a potent enough mix of disastrous ingredients at this point for a full blown property recession. Property buying activity will continue to be driven by lack of houses and the great British public's will to own bricks and mortar of their own. While the dream of purchasing a home may move further into the distance for first time buyers, and those in a weaker financial position, there are presently sufficient buyers in a strong financial position to take their place.

Prices in Norfolk, like much of the country, have so far remained extremely resilient in the face of rising interest rates and inflation. This is largely due to the extreme lack of stock in our area. On top of that, there is a lot of London money flooding in from people looking to relocate as the shift to remote working continues. However, the tide could be turning as a number of clients who have been house hunting for over six months are now finally getting offers accepted where, before, they were consistently being outbid by other buyers. A lot of buyers have in their heads committed to the idea of moving and once they finally complete their purchases we believe the housing market could start to dramatically change with a lack of new people considering moving. Stress testing is only as good as the homeowner's ability to manage their money. Lenders often assume a rate in excess of 5% when assessing affordability. However, customers have become accustomed to cheap money being available and a certain lifestyle. You then add that your circumstances can dramatically change in the life of holding a mortgage so there is always that risk of repossessions increasing regardless.

While the jobs market appears to be robust for now, rising living costs are likely to negatively impact affordability calculations of mortgage applicants. Additionally, mortgage product options and choice already appear to be shrinking, which may point to nervousness from the large high street lenders. However, stress testing of the banks may provide a crumb of comfort if a recession materialises. The lack of a replacement of the Help to Buy scheme is exacerbating uncertainty in the market and may well drive transactions over the summer. Despite the cost of living crisis, our analysis of the market points to a 'panic buy' situation later in the year as the deadline for Help to Buy looms, followed by a stagnation in sales prices coupled with a significant cost increase in private rental rates. However, the Kafkaesque bureaucracy of the mortgage application approval process, coupled with overloaded solicitors and nervous valuation surveyors, could result in a quick, sharp knockout blow to property transactions in the UK. But for now new home and secondary sales market in the outer boroughs of London and the surrounding home counties continue to heat up with year on year increases around 8% to 10% on actual sales data.