According to Nationwide, Wales and Northern Ireland were the strongest performing regions in Q3, with London the weakest.
Robert Gardner, Nationwide's Chief Economist, comments: “Annual house price growth remained in double digits for the fifth month in a row in September, though there was a modest slowdown to 10.0%, from 11.0% in August. House prices rose by 0.1% month-on-month, after taking account of seasonal effects. As a result, house prices remain c13% higher than before the pandemic began in early 2020.
How the regions performed
Gardener continues: “Our regional house price data is produced quarterly and showed a mixed picture across the country in Q3 (the three months to September). While price growth accelerated in Wales, Northern Ireland and Scotland, most English regions recorded a slowdown.
“Wales was the strongest performing region with house prices up 15.3% year-on-year – the highest rate of growth since 2004. Price growth remained elevated in Northern Ireland at 14.3%. House price growth in Scotland picked up to 11.6% in Q3, in contrast to the previous quarter when it was the weakest performing part of the UK (at 7.1%).
“England saw a slowing in annual house price growth to 8.5%, from 9.9% in Q2. Price growth in northern England (North, North West, Yorkshire & Humberside, East Midlands and West Midlands) continued to exceed that in southern England (London, Outer Metropolitan, Outer South East, East Anglia and South West).
“Yorkshire & Humberside was the strongest performing English region for the second quarter in a row, with prices up 12.3% year-on-year, followed by the North West, which saw an 11.4% rise.
“London was the weakest performer, with annual growth slowing to 4.2% from 7.3% last quarter. The surrounding Outer Metropolitan region, which includes places such as Luton, Watford, Sevenoaks and Woking, also saw a softening to 6.8%, down from 8.2% in Q2"
Affordability becoming more stretched
Gardener says: “House prices have continued to rise more quickly than earnings in recent quarters, which means affordability is becoming more stretched. Raising a deposit remains the main barrier for most prospective first-time buyers. A 20% deposit on a typical first-time buyer home is now around 113% of gross income – a record high.
“Due to the historically low level of interest rates, the cost of servicing the typical mortgage is still well below the levels recorded in the run-up to the financial crisis. However, even on this measure, affordability is becoming more challenging."
Outlook – still clouded
Gardener concludes: “As we look towards the end of the year, the outlook remains uncertain. Activity is likely to soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax. Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises as government support winds down, as seems likely.
“But this is far from assured. The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic – such as wanting more space or to relocate – to continue to support activity for some time yet.”
Anna Clare Harper CEO of property consultancy SPI Capital, says: "House price growth fell to ‘just’ 10% in the year to August. This is still exceptional growth given the economic trauma that the UK has been through. House prices have been boosted by the temporary stamp duty relief, which is now tapering down, and widely available and cheap finance.
"Banks are offering mortgages of up to 100% to aspiring homeowners, competing against each other to offer lower rates. And for investors, there are circa 3,000 lending products available. Competition for customers is high, and with so many attractive products available, it’s no surprise that affordability is becoming stretched.
"You only have to look back by a week to the Evergrande crisis to see that borrowing too much has consequences. For those considering their next property purchase, it’s important to remember one thing: just because you can borrow to acquire property with a low deposit, or at an initially low-interest rate, it doesn’t mean you should. Both capital and interest repayments must be paid.
"That said, with rising construction costs, it’s likely that the UK continues to suffer from a shortage of housing stock, which in turn means prices are expected to continue to grow."
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "An ambition to take advantage of the maximum stamp duty concession prompted many to bring forward home-buying decisions so prices are not rising as rapidly now. However, these figures also confirm what we are seeing on the ground, that there is still plenty of life left in the market – in fact, many prefer buying and selling in a less frenzied atmosphere – underpinned by a continuing shortage of stock, particularly of three- and four-bedroom family houses.
"Looking forward, we don’t expect to see major changes although the increase in supply is helping to moderate prices further and bring more balance to the market."
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: "National average house price growth conceals vast regional differences with Nationwide pointing to prices accelerating in Wales, Northern Ireland and Scotland across the third quarter, while most English regions recorded a slowdown. London was again the weak performer with annual growth slowing to 4.2 per cent from 7.3 per cent last quarter but even so, property prices will remain beyond the means of many.
"Continuing rising prices mean affordability is being stretched, even with mortgage rates continuing to fall. The deposit is still the biggest issue for many trying to get on the housing ladder, with the Bank of Mum and Dad called upon more than ever. Lenders, awash with cash, continue to compete for business, which should help support the market into the autumn in terms of cheap mortgage rates. Indeed, we are finding that September was a record-breaking month as buyers continue to search for more space, both inside and out."
