House prices stay flat in June as Iran war fallout continues to weaken the market
UK house prices were flat in June as the conflict in the Middle East and looming political uncertainty continue to subdue consumer confidence.
The average price fell £540 in June, hitting £277,484. This was a slight drop from £278,024 the prior month where prices fell 0.6 per cent, according to the latest Nationwide house price index.
Uncertainty caused by the war in Iran coupled with rocketing energy prices and interest rates led to weak consumer confidence and market sentiment. The Royal Institution of Chartered Surveyors reported a sharp decline in new buyer enquiries in May, while mortgage approvals “also fell noticeably”.
But house prices rose 2.2 per cent annually in June, up from a annual rise of 1.7 per cent the previous month.
Analysts are also confident the market is on the edge of a potential recovery, after the signing of a memorandum of understanding between the US and Iran helped push oil prices down to near pre-conflict levels, helping subside the energy shock.
Robert Gardner, chief economist at Nationwide, said: “If the energy shock continues to subside, the Bank of England may not need to raise interest rates, or at least by less than had previously been anticipated, a view reinforced by the fact that UK inflation has also been lower than expected in recent months.”
The “shift in market expectations” from the Bank of England has “helped bring down the market interest rates” which underpin mortgage pricing in recent weeks.
Gardner added: “If maintained, these trends will help to restore household confidence and ease affordability constraints, paving the way for a recovery in housing market activity in the coming quarters, providing that domestic political uncertainty does not adversely impact sentiment.”
Burnham blues
Tom Bill, head of UK residential research at Knight Frank, said: “As greater stability returns to energy markets, we have seen mortgage rates edge lower, which will support demand. Just as one headwind eases, another gathers strength.”
But Ian Futcher, financial planner at Quilter, warned soft market activity may continue with the effects of the conflict unlikely to “disappear overnight” with consumer confidence remaining “fragile”.
Industry figures also noted the “resilience of the housing market” over the course of the conflict.
Jason Tebb, president of On The Market, said: “The Bank of England’s decision to hold interest rates at the past four meetings is having a steadying effect, suggesting a calm, considered approach with no need to panic.
“As lenders trim their mortgage rates, buyers worried about affordability will find the situation is easing slightly.”
Bill also echoed Gardner’s warning of domestic political uncertainty, with Andy Burnham widely expected to enter No 10 before autumn, which could cause “another summer of speculation around tax, which would keep a lid firmly on activity”.
Others urged the government to do more “to encourage activity”, such as the removal of stamp duty, but Gareth Lewis, deputy chief executive of MT Finance questioned “whether that would happen or make a real difference”.
Northern Ireland surge
In the second financial quarter, a number of regions recorded annual growth ranging from 0.1 per cent to 4 per cent, with Northern Ireland once more bucking the trend.
The region recorded 8.6 per cent annual growth, with prices reaching £226,699. This widely outpaced its nearest competitor the North West, which saw growth of just 3.9 per cent, but higher prices of £231,415.
Gardner said: “Northern Ireland was again the exception, with price growth continuing to outpace the rest of the UK by a wide margin…the strong performance echoes the trend seen in the border regions of Ireland.
“This persistently strong performance has resulted in a deterioration in housing affordability in the region, in contrast with the UK average, which has generally been improving.”
The region recorded 8.6 per cent annual growth, with prices reaching £226,699, outpacing its nearest competitor the North West, which saw growth of just 3.9 per cent.
Both East Anglia and the outer South East failed to record rising prices, seeing declines of 0.4 per cent and 0.7 per cent respectively.
The North reported the lowest house prices at £173,756, but still saw annual growth of 3.9 per cent.
Scotland and Wales also both saw “a slight pickup” in annual growth to 3.5 per cent, with England also reporting a modest “acceleration” of 1.5 per cent, up from 0.9 per cent the first quarter.