Nationwide's chief economist has delivered an optimistic assessment of the UK housing market, highlighting robust price growth despite geopolitical tensions and rising energy costs.
House Price Growth Accelerates
Recent data reveals that house price growth accelerated to 3.0% in April, up from 2.2% in March, with prices climbing 0.4% month on month. The average property now stands at £278,880. This resilience persists despite upheaval from Middle East tensions, including the Iran conflict, which has shaken consumer confidence and driven up energy costs.
Robert Gardner, Nationwide's chief economist, acknowledged that the market's strength has surprised many observers. He said: "It is a surprise because we have seen consumer confidence weaken, as you'd expect, given what's happened in the Middle East and what's happened to energy prices... and yet we've seen the market remain relatively resilient."
Underlying Factors Supporting Prices
While buyer demand has softened and sentiment has fallen, prices have continued to rise, indicating underlying factors at play. According to Gardner, the key driver is the strengthening state of household finances. He told BBC Radio 4 Today: "We've got debt levels at their lowest for about two decades. We know real incomes have made up all the ground that was lost during the cost of living crisis."
This combination of reduced debt and growing incomes has helped protect homeowners and buyers from economic turbulence. Affordability has also improved, with wage growth outpacing house price increases by a "significant margin," while mortgage rates have fallen from their 2023 peaks. Although borrowing costs have edged up slightly in recent weeks, Gardner emphasised they remain well below the highs recorded two years ago and are broadly consistent with 2024 levels.
He said: "Even though affordability has deteriorated a little bit compared to where we were a few months ago, it's still looking fairly comfortable."
Outlook Depends on Energy Crisis
The outlook, however, hinges on how long the current energy crisis persists. Gardner cautioned that economic growth could slow and inflation could rise if elevated oil and gas prices continue, but noted reasons for optimism. He said: "The housing market has been pretty resilient to shock so far, so hopefully that's what we'll see."
Looking ahead, he added: "UK economic growth is likely to be somewhat weaker and inflation higher than previously expected as a result of developments in the Middle East, although the ultimate impact will depend critically on the duration of the shock and the policy response. However, the UK economy and housing market have proved remarkably resilient in recent years. This provides some confidence that, if the latest shock passes relatively quickly, and energy prices normalise in the quarters ahead, any near-term softening in the housing market will also prove short lived."
The data suggests that, for now at least, Britain's homeowners are weathering the storm, supported by stronger finances and rising incomes, even as global uncertainty looms on the horizon.
