"With both mortgage approvals and house prices increasing consistently, and with the cost of borrowing starting to ease, the expectation is that the market will continue to improve under its own head of steam and without the need of government intervention"
- Marc von Grundherr - Benham and Reeves
UK house prices saw a further rise of 0.7% in September with the price of a typical home in the UK now standing at £266,094. The annual rate of growth climbed rapidly from 2.4% in August to 3.2% in September, according to Nationwide, the fastest pace since November 2022.
Average prices are now only 2% below the all-time highs recorded in summer 2022
Robert Gardner, Nationwide's Chief Economist, said: “Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters.
"These trends have helped to improve affordability for prospective buyers and underpinned a modest increase in activity and house prices, though both remain subdued by historical standards.
Regional breakdown shows continued recovery across most areas
“Our regional house price indices are produced quarterly, with data for Q3 (the three months to September) indicating that most regions saw a pickup in annual house price growth.
“Northern Ireland remained the best performer by some margin, with prices up 8.6% compared with Q3 2023. Scotland saw a noticeable acceleration in annual growth to 4.3% (from 1.4% in Q2), while Wales saw a more modest 2.5% year-on-year rise (from 1.4% the previous quarter).
“Across England overall, prices were up 1.9% compared with Q3 2023. Northern England (comprising North, North West, Yorkshire & The Humber, East Midlands and West Midlands), continued to outperform southern England, with prices up 3.1% year-on-year. The North West was the best performing English region, with prices up 5.0% year-on-year.
“Southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) saw a 1.3% year-on-year rise. London remained the best performing southern region with an annual price growth of 2.0%. East Anglia was the only UK region to record an annual price fall, with prices down 0.8% year-on-year.
Flats still lagging
“Our most recent data by property type reveals that terraced houses have seen the biggest percentage rise in prices over the last 12 months, with average prices up 3.5%. Semi-detached and flats saw increases of 2.8% and 2.7% respectively. Whilst detached houses saw more modest growth of 1.7%.
“If we look over the longer term however, detached homes have continued to have a slight edge over other property types, most likely due to the ‘race for space’ seen during the pandemic. Indeed, since Q1 2020, the price of an average detached property increased by nearly 26%, while flats have only risen by c15% over the same period.”
Industry reacts
Tom Bill, head of UK residential research at Knight Frank commented: “Falling mortgage rates led to an increase in house price growth in September, with demand also boosted by buyers putting off decisions until after the election.
"However, the mood has since turned more cautious ahead of the Budget following suggestions by the government it will be painful. We think prices will end the year a few per cent higher but sellers should be aware that buyer exuberance will be in short supply in the final months of the year.”
CEO of Yopa, Verona Frankish, commented: “The current outlook is an extremely positive one when compared to just a year ago and we’ve seen considerable improvements on all fronts, with buyer demand climbing, more homes going under offer and sellers achieving higher prices in the process.
"As a result, house prices are now just two per cent off the record highs seen during the summer of 2022 and we could well see a new record set before the year is out.
"Of course, it’s important to remember that the base rate still remains significantly higher than we’ve seen in recent years and whilst buyers are returning with confidence, we’re not quite out of the woods yet with respect to transactional volumes, which still remain someway off the previous pace.”
Director of Benham and Reeves, Marc von Grundherr, commented: “Although the new Labour government has been quick to wage war on the nation’s landlords, it certainly seems as though the nation’s homebuyers have been left out in the cold with respect to the upcoming Autumn Statement and any positive property market initiatives.
"However, as the latest figures show, it’s far from needed and the property market has continued to prove its resilience, with house prices now increasing at their fastest rate in two years and climbing close to historic record highs.
"With both mortgage approvals and house prices increasing consistently, and with the cost of borrowing starting to ease, the expectation is that the market will continue to improve under its own head of steam and without the need of government intervention.”
Matt Thompson, head of sales at Chestertons, says: “Pent-up demand, lower interest rates and sub-4% mortgage products resulted in more house hunters entering the market in September. In response to the uplift in buyer activity, and with looming changes to Capital Gains Tax in the upcoming Autumn Budget, we have also seen more sellers putting their property up for sale.
"We expect September’s level of market activity to continue in October but sellers will review their position following the Autumn Budget whilst some buyers await the next Bank of England announcement on interest rates in November.”
Nathan Emerson, CEO of Propertymark, comments: “As 2024 has progressed, it has been extremely positive to see a firm trend of growth emerge across the year within the housing market. We have seen the economy settle down to a position that provides far greater consumer confidence and although we are still at the very start of the journey regarding base rates, we are starting to see lenders introduce improved competitive offerings when it comes to mortgage deals, which is a firm foundation for confidence and growth over the coming months.”
Iain McKenzie, CEO of The Guild of Property Professionals, comments: “The biggest surge in house price growth in two years will be met with open arms by homeowners looking to sell.
“House prices usually remain robust at this time of the year, as there is still time to buy, complete and move in before Christmas.
“The final quarter of 2024 will hopefully be more of the same if current market conditions remain in place. While continued positive growth mostly benefits sellers, it brings a sense of stability that buyers will appreciate once they have signed on the dotted line and do not want their property to devalue.
“Affordability concerns still loom for first-time buyers, but as earnings are currently outpacing house price growth, this should go some way towards bridging the gap for those who are close to getting their foot on the ladder.
“In a month’s time, the new Chancellor will take to the despatch box to unveil her first budget and give the property industry a good indication of how this government will engage with it.
“The theme of the Autumn Budget will likely focus on decisions that aim to grow the economy, while spending carefully, which will in turn keep the markets stable and avoid any shock waves to ripple down to the housing market.
“We need to see a renewed push to help people own their own home and any incentives from the Government to help further that goal would be welcome by buyers and sellers alike.”
Nicky Stevenson, Managing Director at national estate agent group Fine & Country, said: “UK house prices saw their strongest annual growth in two years this September — up 3.2% — a positive sign that the economy is stabilising.
“As we head into autumn, we expect the market to gain even more momentum, driven by lower interest rates, steady inflation, and an uptick in buyer demand.
“Two years after the upheaval of Liz Truss's mini-budget, mortgage rates have been steadily declining, drawing some hesitant buyers back into the market. But ongoing affordability challenges mean many are focusing on areas where they can maximise value for money.
“The Bank of England’s upcoming interest rate decision in November could further impact the market. Another anticipated rate cut could sustain buyer activity, maintaining the market’s upward trajectory.
“However, the upcoming October budget introduces new uncertainties, particularly with rumours of a potential increase to capital gains tax. This may prompt some investors and people with a second home to act quickly to finalise purchases before any tax hikes take effect.
“While the recent rise in house prices suggests a resilient market, recovery remains fragile. On the positive side, the combination of stabilising inflation and easing mortgage rates offers a more favourable environment for first-time buyers and those looking to move.”
