Housing price growth is slowing as homeowners renovate rather than relocate

The real estate market is losing momentum due to rising interest rates and rising inflation, and housing price growth fell by one percentage point last month.

By the end of May, real estate values ​​jumped by 11.2 percent, indicates deceleration at an annual growth rate of 12.1 percent in April, according to Nationwide, a construction company.

In cash, the average house rose £ 2,294 from April to May this year, reaching £ 269,914.

National shortage of homes for sale has kept prices high, but consumer confidence has fallen to a record low and a slowdown in price growth will follow, the lender warned.

More than half of homeowners, 54 percent, are thinking about improving their homes rather than buying new property, a Censuswide survey found. Increasing or adding space has been a driving factor for home improvements, while a third said they want to improve energy efficiency or reduce the carbon footprint of their home. This comes as energy bills rose in recent months and rose by an average of £ 693 in April.

Tomer Aboody of real estate lender MT Finance said the disposable income was used intelligently to add value and improve the quality of life, even though there was obvious pressure on people’s wallets. “This will be something that will need to be closely monitored in the coming months as the higher costs of such works and inflation will hit homeowners’ budgets, ”he said.

Robert Gardner of Nationwide said he expected that housing market slows down as the year progressed.

“Household finances are likely to remain under pressure, as inflation is expected to reach double digits in the coming quarters if global energy prices remain high. Consumer confidence criteria have already fallen to a record low, “he said.

The Bank of England is expected to raise interest rates further this year, which could deal a new blow to the real estate market if mortgage interest rates rise at the same time.

Jonathan Hopper of shopping agent Garrington Property Finders said there was a “decisive change” in the background and that the current launch could only take that long.

He said: “Where previously rising prices were driven by a market full of confidence, today’s market encourages customers to despair of finding a home before interest rates rise even higher and the cost of living bites deeper.”

Sellers in the most overheated regions began to control their most optimistic price aspirations as buyers regained strength, Hopper added.

Amey Hellen of Derby-based real estate agents Boxall Brown & Jones said prospective buyers have begun to re-evaluate whether it is the right time to buy.

“May was remarkable for replacements and completions, probably our busiest month since the end of the first prison due to the pandemic, but it felt calmer in terms of potential buyers looking to buy housing,” she said.