House prices continue to show growth month on month

Nick Leeming, Chairman of Jackson-Stops, comments on today’s HMRC property transaction results:

“The latest HMRC property transaction data is a clear indication of a market with no real signs of slowing – at least for now. UK residential transactions for May 2022 are 1.6% higher than the previous month, reflecting both the usual spring bounce as well as the sustained backlog of pent-up demand. Momentum has yet to run its course. By historic standards, borrowing remains cheap and today’s interest rate of 1.25% is still far lower than the historic average of 7% between 1970 and 2022. House prices continue to show growth month on month, albeit at a gentler rate than the record boom of the last 6 months. While the going is good, people are moving. Jackson-Stops UK branch data shows an equally high level of activity across the board month-on-month for May, with a 31% increase in offers received and a 23% increase in new instructions.

“However, it would be unrealistic to anticipate affordability factors not having an impact on the housing market in the coming months. By the year end, it’s been widely accepted that interest rates will grow to 3% and inflation to 11%, seeing those homeowners on tracker and variable mortgages hardest hit. Interestingly, rumours of tighter affordability testing have been recently quashed suggesting the government is keen to do all it can to support property transaction growth. Although house prices will remain resilient into 2023, it will be the lending market that will likely dictate the fortunes of many.

“Whilst higher interest rates are likely to rein in housing demand, more supply is needed to even out the scales and keep transactions buoyant. This is not just in the form of new build properties but also encouraging the sale of under-occupied houses by supporting downsizers and the rising costs of moving.”