"A rather mixed picture regionally, with homeowners in Wales suffering the most with an annual drop of -0.5%"
Robert Gadner, Nationwide's Chief Economist, said:“The pace of annual house price growth slowed to 5.3% in September, from 5.6% in August, though it remained within the narrow range of 3% to 6% that has prevailed since early 2015. The relative stability in the rate of house price growth suggests that the softening in housing demand evident in recent months has been broadly matched on the supply side of the market. Survey data indicates that, while new buyer enquiries have remained fairly subdued, the number of homes on the market has remained close to all-time lows, in part due to low rates of construction activity.
Regional price trends were also little changed. Regions in the south east of England continued to record the strongest gains even though price growth slowed noticeably in the Outer Metropolitan region (from 12.4% in Q2 to 9.6% in Q3) and in London (from 9.9% in Q2 to 7.1% in Q3).
House price growth remained subdued in Scotland (+2%) and Northern Ireland (+2.4%) and small price declines were recorded in Wales (-0.5%) and the North of England (-0.2%), all relative to Q3 last year.
Housing supply rising……but only gradually
The number of new homes built in England has picked up, but is still not sufficient to keep up with the expected increase in the population. In the four quarters to Q2 2016, 139,000 new houses were completed, 30% higher than the low point seen in 2010. However, this is still around 15% below the average rate of building in the five years before the financial crisis and 38% below the 225,000 new households projected to form each year over the coming decade.
With interest rates expected to remain low and schemes, such as Help to Buy, helping to provide those with smaller deposits access to finance, housebuilders should have confidence that there will be sufficient demand from buyers if more homes are built. The major housebuilders appear to have capacity to expand output, with most reporting land banks that could support around five years’ worth of construction at current rates of building activity. However, there is a risk that the uncertain economic outlook may weigh on activity in the period ahead.
Are regional housebuilding trends more sensitive to price signals?
While construction has not kept pace with household formation at the UK level, there are signs that more houses are being built in regions where affordability is more stretched (and where it is likely to be needed the most).
Regions that are more affordable, such as the North West and Yorkshire & Humberside, have seen the smallest increases in housing stock (with a rise of 1.6% over the 2013 to 2016 period, below the increase of 2.2% recorded in England and Wales as a whole).
By contrast, areas such as the Outer South East and the South West, where house prices were relatively expensive, have seen the housing stock rise much more quickly - by 2.4% and 2.6% respectively, over the same period.
There is a fairly close linear relationship between increasing affordability pressures and increases in housing stock, at least when London and the Outer Metropolitan regions are excluded. This suggests that supply has been less responsive to rising affordability pressures than we might have expected in the capital and the surrounding area.
Even though London saw the largest percentage increase in its housing stock over the period (2.9%), we would have expected a rise of 4.3% given the elevated house price to earnings ratio and the experience of other regions.
Similarly, given the elevated house price to income ratio in the Outer Metropolitan region, we would have expected the housing stock to rise by 3.2% rather than the 2.1% recorded over the same period.”
Russell Quirk, founder and CEO of eMoov.co.uk, said: “Today’s report by Nationwide shows that prices have cooled marginally since last month, which could elude to the first real evidence of any post-Brexit uncertainty in the market.
I don’t think this is quite what we are seeing. The market remains in a very stable condition and in fact prices are showing stronger rates of growth both quarter to quarter and annually when compared to September of last year.
September has also enjoyed the third largest annual price growth year on year, so I don’t think there is any need to run for the hills just yet. As Nationwide point out, the rate of supply has remained inadequate however, it seems the slight cool in prices is a result of buyers sitting tight rather than sellers and who can blame them.
The inflated sate of the market coupled with sucker punches by the government, such as yesterday’s decision to scrap the Help to Buy scheme, means getting on the ladder in today’s climate is a big ask.
A rather mixed picture regionally, with homeowners in Wales suffering the most with an annual drop of -0.5%.
Very interesting to see that Nationwide report a slow in most southern regions, whilst the majority of regions in the North have seen stronger growth. This could be a sign of post-Brexit confidence between what is for the large part, the split between the Leave and Remain camps. Either way, it would seem the northern property powerhouse could be starting to stir once again, helping to reduce the North-South divide as has been seen previously.”
Ben Madden, managing director of London estate agents Thorgills, had this to say: “The annual rate of house price growth may have nudged down but the slight uptick in September shows a resilience in the market that many did not expect post-Brexit.
The acute supply shortage is the major pillar supporting house prices but the recent interest rate cut and the prospect of another cut to come also stimulated demand in September and complemented the usual seasonal uplift. Without a shadow of a doubt, prospective buyers are being far more cautious before they offer but likewise sellers are beginning to feel that they are in a stronger position than they were a few months ago.
In terms of price growth, London may be out of the top three regions for the first time since 2009 but every cloud has a silver lining. The capital’s housing market had to cool down and so for the sake of longer term stability being off the podium for a while will do it no harm.”
Jonathan Hopper, Managing Director of Garrington Property Finders, comments: “After August’s unexpected surge, these more modest figures from the Nationwide represent a return to the post-Brexit norm. With both supply and demand slipping, average prices are creeping up almost by default.
But even though the economic fundamentals are far from normal, so far the impact of the Brexit vote has been a soft landing rather than a slump – a point reinforced by the Nationwide’s surprisingly robust quarterly figures. Average prices across the UK rose at a faster rate during the three months after the vote than they did in the three months before it.
That said, it’s premature to talk of a post-Brexit boost. Price rises in the wake of the vote have been flattered by a temporary injection of pent-up demand – as buyers who sat on the fence in the run-up to the referendum finally get off it. Reassured by rock bottom interest rates and the realisation that the world hasn’t ended, many buyers are showing strong intent – even if the lack of market clarity is proving disconcerting.
Crucially, sellers have battened down the hatches rather than abandoned ship, and low levels of supply have placed a floor under price drops. There remains huge variation by region and price bracket, yet in many areas it has become a buyer’s market, with the boldest asking for substantial discounts in return for the certainty of a sale. 100 days on from the vote and the dust has yet to fully settle. The market has shown resilience, but it’s too soon to talk of a rebound.”
