UK house prices suffer largest monthly fall since early 2009
Annual house price growth was 1.8% in May, but prices slipped 1.7% month-on-month. Nationwide noted this was the largest monthly drop since February 2009.
In April, prices had risen 3.7% annually and 0.9% on a monthly basis.
"In the opening months of 2020, before the pandemic struck the UK, the housing market had been steadily gathering momentum. Activity levels and price growth were edging up thanks to continued robust labour market conditions, low borrowing costs and a more stable political backdrop following the general election," Nationwide's Chief Economist Robert Gardner said.
He continued: "But housing market activity has slowed sharply as a result of the measures implemented to control the spread of the virus. Indeed, data from HMRC showed that residential property transactions were down 53% in April compared with the same month in 2019".
The average price slipped to GBP218,902 from GBP222,915 in April.
Gardner added: "Mortgage activity has also declined sharply. Nevertheless, our ability to generate the house price index has not been impacted to date, as sample sizes have remained sufficiently large (and representative) to generate robust results.
"Low transaction levels may still make gauging price trends difficult in the coming months - especially for regional indices, which by their nature have lower sample sizes".
Nationwide said behavioural changes and social distancing are "likely to impact the flow of housing transactions for some time".
Recent market research survey suggested that about 12% of the population had put off moving as a result of the lockdown, Nationwide added.
"Most viewed the current situation as a temporary pause in the market, with would-be buyers now planning to wait six months on average before looking to enter the market," Gardner said.
He continued: "Peoples' housing preferences may also be impacted. Indeed, about 15% of people surveyed said they were considering moving as a result of life in lockdown, with a third (34%) stating they think differently about their home as result of the coronavirus outbreak, especially the importance of a garden and the need for more indoor space. Moreover, 22% of people said they had changed their mind as to what constituted the most important aspects of a home and are considering improving their home as a result of Covid-19".
In the medium-term, the outlook for the housing market remains "highly uncertain", Nationwide said. ■