House prices rise 12.8% over the last 12 months, but costs of living pressures are likely to weigh on activity over the coming months.
Commenting on the latest house price data, Jamie Durham, economist at PwC UK, says:
“The average house price in the UK reached a record £283,000 in May, with prices up 12.8% compared to last year.
“While London was once again the slowest growing region, prices still rose by over 8% in the last 12 months, meaning the average home in the capital costs around £40,000 more than it did a year ago.
“Consistent high annual house price growth over the last year has been underpinned by a variety of factors, including a strong labour market, the accumulation of more than £200bn of savings during lockdowns, and a shortage of homes on the market relative to demand. Together, these factors mean transactions remain above pre-pandemic levels.
“However, over the coming quarters we expect the market to slow as cost of living pressures bite. Rising inflation, increasing interest rates and the risk of recession have dampened consumer confidence. Weaker sentiment is likely to make some consumers consider delaying major financial decisions until the outlook for their personal financial situation is clearer.
“There are already some signs of a softening in activity, which are likely to weigh on price growth. Mortgage approvals have now broadly returned to 2019 levels, and lenders have reported that they expect a significant reduction in demand over the next few months.”
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