Nationwide HPI May 22

ended 31. May 2022

On Wednesday morning at sparrow's fart (07:00), the Nationwide is publishing its May House Price Index. Selection of questions for you:

  • How active was the property market in your neck of the woods in May? Quieter due to rising interest rates and rabid inflation?
  • There are growing signs that the rate of house price growth is slowing. But will prices fall or will they be supported by the lack of supply?
  • Sentiment is being hit for six by inflation. Do you expect deteriorating sentiment to drag on prices during the rest of the year?
  • A lot of people point to the robust jobs market as supporting the property market, but do you think a recession is on the cards, or worse?
  • Will all the stress testing undertaken by the banks come to the rescue of mortgagees if rates rise a lot further? Or will the whole thing collapse anyway?
  • What's the price of a can of Winalot these days?

I'll probably pin you if you can get the word 'Kafkaesque' into your response, in the right context of course. If you've never read Kafka, don't. Well maybe The Metamorphosis. The rest is tosh.

5 responses from the Newspage community

The property and mortgage market in May was busier than Sue Gray so there's still life in property, even if it's not as robust as it was six months ago. Even though rates are rising, inflation's biting, and wages are stagnating, there is no let-up in demand. And while house prices show signs of slowing, that doesn't automatically translate into a property market crash. They couldn’t continue at the same pace, so a brief pause to catch our breath is a good thing. Of course, the question on many people's minds is: are we heading for a recession? The Kafkaesque government say the economy's fundamentals are sound due to unemployment sitting at historic lows, but a shortage of workers and a vast number of current vacancies could translate into further inflation, or worse still, stagnation, as wages rise to compensate for the cost of living crisis and employers are forced to increase pay or risk losing staff. Unfortunately, we have the necessary and sufficient conditions for a recession; decaying consumer confidence, raging inflation and stagnant wages. Sadly, all rivers lead to the sea at the moment.
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.
The fast paced, aggressive market conditions we have become used to may be over as people re-evaluate whether this is indeed the right time to buy. May 2022 was exceptional for exchanges and completions, probably our busiest month since the end of the first pandemic lockdown, but felt quieter in terms of prospective buyers looking to purchase homes. If buyers do drop out of the market, reducing demand, we may finally start to see some parity with supply, which in turn will slow price rises. We cannot see a crash materialising or prices falling but instead a much steadier market until living costs are reduced, especially gas and electricity bills. They really are weighing on people's minds. Mortgage rates will need to rise a lot more to start impacting borrowing and house prices, as they are still very low by historical standards. If affordability checks and budgeting are done correctly and if someone is finally in a position to buy, especially if they are a first-time buyer seeking to get out of rented property, many are still going for it. Home improvements may have to be put on hold though as people focus on outgoings.