UK house prices 'broadly stable' as economic picture improves

House prices in the UK were relatively stable in May amid a brighter outlook for the economy, according to the latest data.

Although mortgage rates remain elevated, consumer confidence has improved over the last few months. And with strong pay growth and inflation continuing to come down, and a cut in interest rates on the horizon, mortgage affordability is improving.

At the same time, an increase in the number of properties being listed is expected to keep house prices in check.

Sixth consecutive year-on-year rise

Monthly data from Halifax shows that the average cost of a home stood at £288,688 in May.

Prices edged down slightly by 0.1% compared to April, which in cash terms equates to a dip of around £170.

On an annual basis prices rose for a sixth consecutive month, up by 1.5% after a 1.1% rise in April.

"Market activity remained resilient throughout the spring months, supported by strong nominal wage growth and some evidence of an improvement in confidence about the economic outlook," said Amanda Bryden, head of mortgages at Halifax. "This has been reflected in a broadly stable picture in terms of property price movements, with the average cost of a property little changed over the last three months."

Bryden added that a period of relative stability in both house prices and interest rates "should give a degree of confidence to both buyers and sellers".

Regional variations

The North West is the strongest performing nation or region in the UK, with house prices growing by 3.8% on an annual basis in May, according to the Halifax data.

Northern Ireland also showed strong growth, up 3.2% in May, while prices in Scotland rose by 1.9% and in Wales by 0.7%.

Eastern England recorded the largest year-on-year decline, with prices down by 0.8% in May.

Property website Zoopla noted that in the south of England, price falls are focused on coastal cities and other areas where prices jumped higher during the pandemic 'race for space' and where demand is now weaker. Meanwhile, prices are rising in cities with below-average house prices where the impact of higher mortgage rates is less pronounced.

Good supply of homes set to keep prices in check

In another positive sign for potential buyers, more homeowners are listing their properties for sale -- increasing choice for buyers and helping to rein in asking prices.

Zoopla reports that supply of homes for sale is at the highest level in eight years, driven by a rebound in the number of three and four+ bed homes for sale as existing owners return to the market and feel more confident to move.

The average estate agent office has 31 properties for sale, compared to 26 properties this time last year.

Sales agreed are currently up 13% year-on-year, but across most regions the growth in new homes for sale is outpacing the growth in the number of sales being agreed.

This increase in supply is likely to keep house price growth in check over the rest of 2024.