Rising house prices in the UK slowed this month as a weakening economy, cost of living and rising interest rates cooled the market. Lender Nationwide reports that prices rose 0.3% this month, a significant slowdown in house price inflation of 0.9% in May – but it is still the 11th monthly increase in a row. This led to the annual rise in house prices in the UK to 10.7% in June, from 11.2% in May, with most regions recording a “slight slowdown” in annual growth over the last quarter. Nationwide it states that:
The price of a typical house in the United Kingdom climbed to a new high of 1. 271,613, with average prices exceeding .000 26,000 last year. The South West surpassed Wales as the strongest performing area, while London remained the weakest The Southwest region with the strongest performance through the pandemic
House price index in the United Kingdom Photo: Nationwide Robert Gardner, chief economist at Nationwide, says the market is expected to slow down further – as interest rates continue to rise: “There are signs of a slowdown, with the number of mortgages approved for home purchases falling to pre-pandemic levels in April and inspectors reporting some easing in new buyer applications. However, the housing market has maintained a surprising momentum, given the growing pressure on household budgets from high inflation, which has already driven consumer confidence to a record low. Gardner says current labor market strength and low housing availability have maintained “upward pressure on housing prices”. But….. “The market is expected to slow down further as the pressure on household finances intensifies in the coming quarters, with inflation expected to reach double digits by the end of the year. In addition, the Bank of England is widely expected to raise interest rates further, which will also have a chilling effect on the market if it fuels mortgage rates.
It is also coming today
The OPEC oil producer group holds a regular meeting to agree on production targets. No major change is expected this month, despite pressure from the West to increase production. At least five OPEC + representatives said this week’s meeting would focus on reaffirming production policies in August and not discuss them in September, according to Reuters. A data turmoil will give us a new picture of the global economy, including inflation in France, unemployment in the eurozone, US jobless claims and the PCE measure of US inflation. Commerce Secretary Anne-Marie Trevelyan and Shadow Chancellor Rachel Reeves both appear at the British Chamber of Commerce’s annual conference, along with business leaders and a senior cabinet minister. Christine Lagarde will close the European Central Bank Forum in Sintra, where Bank of England Governor Andrew Bailey warned yesterday that Britain would suffer more inflation from other major economies during the current energy crisis.
THE AGENDA
7 a.m. BST: UK 1st quarter GDP report (second estimate) 7 a.m. BST: Pan-Hellenic house price index for June 7.45 a.m. BST: Inflation report in France for June 8.30 a.m. BST: Decision on the interest rate of the Swedish Riksbank 10 am. BST: Unemployment report in the Eurozone for May 1.30 p.m. BST: Weekly Unemployment Claims in the US 1.30 p.m. BST: US PCE inflation measure for May 2.30 p.m. BST: Speech by ECB President Christine Lagarde.
Worryingly, business investment in the UK has continued to decline. Business investment fell 0.6% in January-March, according to today ‘s UK UK GDP report, which puts them 9.2% below pre-coronary level. There was a continuing weakness in capital expenditure on transport equipment during the quarter, due to supply chain constraints, in particular the continuing shortage of semiconductors. Investment photo: ONS This latest drop in real household incomes in the UK leaves people less protected for future financial problems, at risk of recession. Paul Dales of Capital Economics explains: The final data for the first quarter GDP may make households look more vulnerable to the big drop in real incomes that will hit the second and third quarters. Although GDP and consumer spending will not fall as much as real incomes, it is clear that the economy will be very weak for a while and the recession is a real risk. Real incomes have now fallen moderately in each of the last four quarters, Dales adds, with more pain ahead: This meant that the savings rate remained at 6.8% instead of increasing to 7.2% as we had predicted. This leaves households with a slightly smaller safety stock than we expected to cope with the much larger reductions in real incomes that will hit the second and third quarters due to the inflation boom. In 2022 overall, we believe that real incomes will fall by about 2.0%.
UK household incomes experience the biggest drop ever
UK households experienced a further drop in real incomes in the first three months of this year as the cost-of-living crisis worsened. Inflation outpaced gains again in January-March, for the fourth consecutive quarter, as UK households suffered the biggest drop in real incomes on record. Real household disposable income fell 0.2% in the January-March quarter, according to the latest GDP figures from the National Statistics Office. This is the fourth consecutive quarter of real negative growth in disposable income – the worst course since records began in 1955, according to Bloomberg. Although nominal household income increased by 1.5% in the first quarter, it was offset by quarterly household inflation of 1.7%, according to the ONS. UK household incomes are in the longest period of decline Real incomes have fallen for four consecutive quarters, says ONS Figures underscore the severity of the cost of living crisis – Max HarryHindsight Capital (@ MaxDrake007) June 30, 2022 The ONS also confirmed that the UK economy grew by 0.8% in January-March, as initially estimated. Darren Morgan, Director of Financial Statistics at ONS, said: “Our latest assessment of economic growth in the first quarter has not been completely revised, showing that the United Kingdom has continued to recover from the pandemic. “Both household incomes and expenditures increased in cash in the first quarter, leaving the savings rate unchanged. “However, after taking into account inflation, incomes fell again, for the fourth consecutive quarter.” Guy Harrington, CEO of Glenhawk (which provides bridging funding), says it is “absolutely insane” to believe that house prices will continue to rise in the current climate. Warns: “Another month of slowing growth is just a harbinger of the sharp correction that is set to torpedo the UK housing market caused by a perfect storm of record inflation, geopolitical turmoil, rising interest rates and once-in-a-generation cost of living. crisis. It is utter madness to believe that house prices will continue to rise. “As attention dominates the market, the outlook for 2023 looks increasingly bleak.” Updated at 07.51 BST The current double-digit annual increase in house prices does not seem sustainable in the long run, given the economic pressures. So says Myron Jobson, senior personal finance analyst at interactive investor: Real estate prices have risen faster than wages, creating an affordable squeeze, while mortgage rates have risen to levels we have not seen in a long time. These factors, as well as the prospect of higher interest rates to curb fugitive inflation, are likely to contribute to some extent to lowering house prices. “The housing market is already showing signs of cooling. Mortgage activity has begun to decline, falling to pre-pandemic levels in April, and new buyer searches have declined – indicative of inflationary pressures currently being exerted on household budgets. But a slowdown is more likely than a real estate crash, Jobson predicts, given the imbalance between supply and demand. Rising house prices continue to “drift down” in response to growing pressures on the wider economy, says Nicky Stevenson, chief executive of the national real estate group Fine & Country: “Rising borrowing costs come at a time when disposable income is already shrinking and the UK is nearing recession. “These pressures are sure to extend economic affordability in the coming months, with inflation still at its peak and now being marked by the Bank of England more aggressive monetary tightening. “A tight labor market and the ongoing supply crisis will continue to mitigate this cooling effect, with overall earnings remaining strong by historical standards.” London remains the region with the weakest performance in terms of rising house prices since the start of the pandemic. The Southwest saw the largest increase as people searched for larger, more rural properties to work from home. Nationwide it states that: Since the first quarter of 2020, average house prices in the capital have risen by 14.9%, while all other areas, except the Outer Metropolitan, have risen by at least 20%. “The Southwest was also the strongest region during this period, with an increase of 27.7%, after taking into account the seasonal effects, followed by Wales, where average prices increased by 26.2%. Meanwhile, in the northwest, prices rose by 25.8%. Rising house prices in the UK from the pandemic Photo: Nationwide Home prices in Southwest America rose 14.7% year-on-year in the last quarter as it surpassed Wales as the best-performing region in the second quarter It was followed by East Anglia, where the annual price increase remained at 14.2%, reports Nationwide. Wales slowed its annual price growth to 13.4%, from 15.3% in the first quarter. The rise in prices in Northern Ireland was similar to the previous quarter at 11.0%. Scotland, meanwhile, saw house prices rise 9.5% year on year. Panhellenic house price index Photo: Panhellenic
Introduction: Housing prices in the UK are slowing in June
Good morning and welcome to the rolling coverage of business, the global economy and the financial markets. Rising house prices in the UK slowed this month as …
