Nationwide says that 10 of the UK’s 13 regions recorded slower annual price growth in the third quarter of the year, with the South West seeing the strongest month, while London remained weakest. The average price of a home, according to this morning's figures, is up slightly on the month and now stands at £273,751- a rise of £1,492 against August's average.
Robert Gardner, Nationwide's Chief Economist, comments: “In September, annual house price growth slowed to single digits for the first time since October last year although, at 9.5%, the pace of increase remained robust. Prices were unchanged over the month from August, after taking into account seasonal effects. This is the first month not to record a sequential rise since July 2021.
“There have been further signs of a slowdown in the market over the past month, with the number of mortgages approved for house purchase remaining below pre-pandemic levels and surveyors reporting a decline in new buyer enquiries. Nevertheless, the slowdown to date has been modest and, combined with a shortage of stock on the market, this has meant that price growth has remained firm.
“By lowering transaction costs, the reduction in stamp duty may provide some support to activity and prices, as will the strength of the labour market, assuming it persists, with the unemployment rate at its lowest level since the early 1970s.
“However, headwinds are growing stronger suggesting the market will slow further in the months ahead. High inflation is exerting significant pressure on household budgets with consumer confidence declining to all-time lows.
“Housing affordability is becoming more stretched. Deposit requirements remain a major barrier, with a 10% deposit on a typical first-time buyer property equivalent to almost 60% of annual gross earnings – an all-time high.
“Moreover, the significant increase in prices in recent years. together with the significant increase in mortgage rates since the start of the year. have pushed the typical mortgage payment as a share of take-home pay well above the long-run average.
Most regions see further slowing in price growth
Robert adds: “Our regional house price indices are produced quarterly with data for Q3 (the three months to September) showing a softening in annual house price growth in 10 of the UK’s 13 regions.
“The South West remained the strongest performing region, even though it saw a slowing in annual house price growth to 12.5%, from 14.7% in Q2. This was closely followed by the East Midlands, which saw annual price growth pick up to 12.3%, from 11.4% in the previous quarter.
“Wales saw annual price growth slow to 12.1% but remained the top performing nation. Price growth in Northern Ireland softened to 10.1%. Meanwhile, Scotland saw a further slowdown in annual growth to 7.8%, compared with 9.5% last quarter.
England saw a further slowing in annual house price growth in Q3 to 9.9%, from 10.7% in Q2. While the South West remained the strongest performing region, southern England continued to see weaker growth overall than northern England.
Robert concludes: “Within northern England (which comprises North, North West, Yorkshire & The Humber, East Midlands and West Midlands), the East Midlands was the strongest performing region with price growth picking up to 12.3% year-on-year, from 11.4% in the second quarter.
“London remained the weakest performing UK region, although did see a modest pickup in annual price growth to 6.7%, from 6.0% last quarter.”
Nathan Emerson, Chief Executive of Propertymark, said: “Sellers coming to market are still hoping to achieve the boost in prices we saw coming out of bidding wars last year. However, buyers are in a more sensible frame of mind and are taking their time over moving and budget decisions and we will see this affect prices being achieved.
"Our own data from our estate agent members across the UK shows the number of new homes and buyers coming to the market is up year-on-year which will underpin stability.
"With interest rate rises, we could start to see some re-negotiations if mortgage offers expire during the conveyancing process which is currently taking over 17 weeks on average.
"A trend of re-negotiation would start to soften house prices as those final sale prices are used by agents to create comparable evidence for the valuing of new properties entering the market.”
Matthew Thompson, Head of Sales at Chestertons, says: “We have been witnessing a growing number of house hunters who rush to secure a property in order to benefit from a fixed rate mortgage at a more beneficial rate. This has contributed to London’s property market remaining busy and competitive throughout July, August and September.”
“As interest rates are increasing and lenders are adjusting their affordability calculations, buyers who have not yet found a property may be facing a change in what they can afford. As a result, many house hunters will be required to review their initial budget, whereby rising utility costs play yet another important factor to take into account. To still find a new home before further interest rate hikes, many of London’s house hunters will see no other option but to compromise on property location and size. Inevitably, this could lead to some buyers deciding to compromise on the type of property they initially set out to buy.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: "House prices continued to edge upwards in September, mainly due to lack of stock, although clearly some of the heat has come out of the market with the slowdown in annual price growth.
"So much has changed even since the beginning of September. Lenders have been pulling fixed-rate mortgages left, right and centre as Swap rate volatility make them extremely difficult to price. Many of the smaller lenders in particular are waiting to see what the market does before relaunching.
"It is unlikely that much will change before the next interest rate decision on 3 November or the Government plan supported by the Office of Budget Responsibility on 23 November. Borrowers concerned about their mortgage should seek advice from a broker as to the options available and plan ahead as much as possible."
