The housing market still has some momentum as house prices rose 11% year-on-year in their 12th consecutive month of growth, according to the latest report by Nationwide.
Despite the ongoing cost of living crisis and soaring 9.4% inflation, high employment and a limited supply of homes kept prices climbing higher even amid the volatile market environment.
The 11% growth exceeded the 10.7% increase in June, however Nationwide said there were preliminary signs of a slowdown as mortgage approvals took a slight dip, and the cost of living crisis started to display some cracks in the market’s strength.
Analysts also pointed out the upcoming Bank of England meeting, which is expected to hike rates as high as 0.5% in a bid to tackle soaring inflation levels, and could serve to drag the housing market to a slowdown.
“High employment and a limited number of homes on sale have supported market growth with activity strong across all buyer types,” said Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey.
“However, like the Zoopla figures published earlier today there are early signs that the market is starting to slow. Mortgage approvals are starting to decline so we can expect to see activity become more muted as people tighten their belts as their bills continue to increase.”
“The prospect of further interest rate increases on the horizon may also make people think twice about whether they can afford to move home.”
Meanwhile, a return to office working could also dent the housing market, after a surge in workers searching for home offices in the lockdown era sent demand through the roof.
The rollout of back-to-office working might see fewer people looking for more green space and a work from home area away from the central city hubs.
“The pandemic and the growth of flexible working was a huge factor in recent house price activity,” said Morrisey.
“Not having to go into the office every day made people reconsider where they live and whether they could move elsewhere to get a bit more space.”
“This fuelled market behaviour in recent times but could dip as we emerge from the pandemic and more of us return to the office.”