UK house price growth slowed in May, after demand in the residential property market declined in conjunction with an increase in the cost of living.

Knight Frank said the median home price rose by 11.2 percent year-on-year in May 2022, compared to 12.1 percent in April. While it estimated the annual rate of house price growth at 10.5% compared to 10.8% in the previous month, this is the second consecutive month that both indicators have recorded a decline, indicating that the house price growth has now reached its peak.

High cost of borrowing

Knight Frank expected the demand for homes to weaken due to the increase in the cost of borrowing, after the Bank of England raised interest rates a quarter point to 1.25%, the highest level since January 2009, as well as the rise in the cost of living, which could lead to a decline in house price growth to single digit by the end of 2022.

real estate steadfastness

Despite the end of the eight consecutive months of growth, Knight Frank data indicates that residential demand has proven resilient, with an increase in potential new buyers of 42% in May, which is higher than the average of the past five years (excluding 2020) in the Kingdom. United.

Mortgage

Mortgage approvals to buy - a forward-looking indicator of demand - fell below the pre-pandemic 12-month average in May, at 67,000 to hit a two-year low.

Despite the economic uncertainties, the real estate market in London is still good, after the demand recovered from the repercussions of the pandemic and the improvement of the UK economy.

According to "Knight Frank", the number of new potential buyers in London last month recorded the third highest increase in a decade, while supply also increased after warnings of an economic crisis escalated. With both demand and supply rising, the inevitable result is more deals.

rental market

The company suggested that the frustrating period for tenants will continue this summer in the rental market in London, despite some indications that the supply may decline slightly, for several reasons, most notably:

1- More owners are renting their properties after failing to achieve the required price in the sales market.

2- High tenant volatility, as more and more workers are changing jobs or leaving the UK altogether.

According to PWC, one in five workers is likely to quit their job in the next 12 months.