• House price inflation was flat at 0% in May 2024, but UK house prices are on track to be 1.5% (£3,900) higher by the end of 2024

• UK house prices are currently 8% “overvalued” but will be “fairly valued” by the end of the year due to rising incomes

• House prices have risen across all regions over the last 3 months

• Annual rate of house price growth remains negative across southern England but is rising elsewhere

• Home buyers and sellers largely undeterred by election campaign

• Demand (6%) and sales agreed (8%) are both higher than this time last year

• 75% of the 1.1 million sales projected for this year are either complete or in the sales pipeline.

Home Buyers and Sellers Shrug off Election

• The recent pick up in sales market momentum has continued over June, albeit at a slightly slower pace than the previous 2–3 months. New sales agreed are still running 8% higher than a year ago, and other key measures of market activity are also higher year-on-year.

• However, there are signs that market activity is starting to slow as we approach the quieter summer period. Buyers and sellers who were at the start of the home-buying process when the election was called are more likely to have delayed their buying decisions until after the election. And this is adding to the slowdown in activity.

• Sales agreed are down slightly month-on-month across all regions, led by the North East (-6%) and West Midlands (-5%). The overall stock of homes for sale continues to grow across all regions, albeit at a slower rate than recorded over recent months. There are still almost a fifth more homes for sale than a year ago.

House price inflation is static, and is still negative in the South

• Improving sales volumes over the first half of 2024 has led to a levelling in average house prices which is reflected in our house price index. All regions and countries of the UK have registered an increase in house prices on a month-on-month basis since January.

• The annual rate of UK house price inflation is now static at 0% in May 2024, up from a low of -1.3% in November 2023, and +1.6% a year ago. House prices continue to register annual price falls across southern England at a slowing rate. But prices continue to increase across the rest of the UK by up to 3.3% in Northern Ireland.

• We see no evidence that price rises will pick up speed in the coming months. However, UK house prices are on track to be 1.5% higher at the end of 2024.

Housing remains overvalued but the trend is improving

• One way we track affordability is to measure the extent to which actual house prices are higher or lower than an “affordable house price”. This is calculated from household incomes and mortgage rates.

• The recent jump in mortgage rates led to house prices being overvalued by 13% at the end of 2023. This is less severe than in the run up to 2007 (the global financial crisis) and during the “house price bubble” of the late 1980s house. Double digit price falls followed both these periods of overvaluation. Price falls have been smaller more recently as the overvaluation was more modest and sales volumes have taken the hit.

• Faster wage growth over the last 3 years has boosted household disposable incomes and helped offset some of the impact of higher mortgage rates. Mortgaged buyers have also been taking longer term mortgages to eke out that extra 5%+ of additional buying power.

• We estimate that house prices were 8% overvalued at the end of March 2024, but by the end of the year this overvaluation will disappear. This assumes house prices rise 1.5% and mortgage rates remain at 4.5%.