The average price of a home jumped by 1.8% to a new record of £372,894 in May compared to the previous month, in a delayed response to the higher-than-expected level of market activity since the start of the year, according to data from Rightmove.
This monthly lift is the biggest of the year so far, says the property website’s House Price Index, and is “significantly higher” than the historic average May rise of 1%, and up from a 0.2% rise in April.
The average annual house price is 1.5% higher than this time last year, easing from a 1.7% rise last month.
The report adds that agreed sales numbers are currently 3% behind the last more normal pre-pandemic market of 2019.
The discount from the final asking price to an agreed sale price has steadied at an average of 3.1%, in line with normal market levels, “reflecting home-mover confidence in the outlook for the market”.
Buyer demand is 1% lower than in 2019 for top-of-the-ladder properties (above £650,000) compared with 3% above 2019’s level in the second-stepper sector (around £340,000), and 6% above in the first-time-buyer sector (around £225,000).
It says that average mortgage rates have remained “steady” despite the 12th Bank of England base rate rise in a row earlier this month.
An average five-year fixed-rate mortgage, with a15% deposit, is now 4.56%, compared to 5.89% last October, in the wake of former Chancellor’s Kwasi Kwarteng tax-cutting mini-Budget.
Rightmove director of property science Tim Bannister says: “This month’s strong jump in new seller asking prices looks like a belated reaction and a sign of increasing confidence from sellers, as we’d usually see such a big monthly increase earlier in the spring season.
“One reason for this increased confidence may be that the gloomy start-of-the-year predictions for the market are looking increasingly unlikely.
“What is much more likely is that the market will continue to transition to a more normal activity level this year following the exceptional activity of the pandemic years.
“Steadying mortgage rates and a generally more positive outlook for the economy are also contributing to more seller confidence, though there are likely to be more twists and turns to come.”
The Mortgage Lender chief executive Peter Beaumont adds: “It’s no secret that house prices have been volatile over the course of the year, and while prices have risen according to Rightmove, it’s too soon to tell whether this trend will hold.
“However, as spring begins in earnest, buds of optimism are beginning to sprout within the market.
“Transaction levels have been rising, a key indicator that demand is beginning to return as consumers grow in confidence amongst predictions that the inflation rate will fall.
“However, with a further increase to the base rate this month, there will still be uncertainty around mortgage rates for those preparing to get onto the ladder or re-mortgage.
“FTBs will be weighing up whether to stay renting despite increasing rental prices or take the plunge.”
MT Finance director Tomer Aboody says: “With mortgage rates becoming more stable and considerably lower than around the time of the Kwarteng budget, there’s definitely more confidence in the market with sales numbers almost returning to around pre-pandemic levels.
“With possibly the final base rate increase on the horizon and some positive noises coming from the government, it will be interesting to see how the market further adjusts and whether it continues to defy expectations in coming months.”
Former Royal Institution of Chartered Surveyors residential chairman and North London estate agent Jeremy Leaf points out: “These are, of course, only asking or aspirational prices, not prices paid but do reflect what we have also been seeing in our offices – now that inflation and interest rates seem to be at or approaching their peak buyers are slowly returning with added confidence making it feel like a more normal spring market.
“However, without the intense competition for property that we saw 12 months ago, those not relying on mortgages or who are equity rich from the pandemic are very much to the fore but don’t want to be rushed before taking the plunge.
“The reasons for moving in many cases haven’t disappeared even though the race for space may be run.
“Looking forward we don’t see any particularly significant changes other than supply and demand continuing to balance out.”
