The pace of house price increases in the UK is now almost half the annual rate it was in the spring, according to the latest Halifax property index.
By David Sapsted/ Relocate
The 5.8 per cent, year-on-year rate in September – raising the average UK house price to just over £214,000 – was the lowest on the Halifax index for three years. Only last March, the rate of increase was in double figures.
Martin Ellis, Halifax housing economist, said, “The housing market has followed a steady downward trend over the past six months, with clear evidence of both a softening in activity levels and an easing in house price inflation.
“A lengthy period where house prices have risen more rapidly than earnings has put pressure on affordability, therefore constraining demand. Very low mortgage rates and a shortage of properties available for sale should, however, help support price levels over the coming months.”
On a quarterly basis, prices in Q3 were 0.1 per cent lower than in the second quarter but Ben Madden, managing director of the estate agents Thorgills, said the slowdown in the market was only to be expected. “After the stamp duty tax hit for landlords and second homeowners, and shock Brexit vote, it’s no surprise the market has cooled down over the past six months,” he said.
“The collapse in the market many predicted simply hasn’t materialised and the reason for this is the acute lack of supply, exceptionally low mortgage rates and an economy and consumer that, as yet, appear to be holding up despite the political uncertainty.
“It’s nevertheless a peculiar and uncertain market. Generally speaking, buyers feel it’s their market, but the longer the economy holds up in the aftermath of Brexit, the more the market may begin to favour sellers.”
Upward trend in UK house prices slows
Nicholas Finn, executive director of Garrington Property Finders, felt that, with sterling trading at its lowest against the dollar for more than three decades, “many astute overseas buyers” would be eyeing the UK market.
“The housing market has successfully performed a soft landing – and the runway has so far been smooth,” he said. “But the runway is long, and there could be potholes ahead. At present, prices are being supported by the combination of resilient consumer confidence and a chronic shortage of homes for sale.
“With many potential sellers battening down the hatches and opting to delay putting their home on the market, the mismatch between demand and supply will prevent any sudden drops in price.
“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.
“The UK finally has a timeframe for Brexit, but lingering uncertainty continues to cramp demand at the top end of the market. Yet with sterling now at its lowest level against the dollar for three decades, many astute overseas buyers sense that now is the time to pounce.”
Prime central London slowdown continues
Rob Weaver, director of investments at property crowdfunding platform Property Partner and a member of the residential committee of the British Property Federation, added, “The contrast couldn’t be starker. As house prices have shown stability post-Brexit, it’s been panic stations for the commercial sector, although that now appears to be settling down.
“The softening in market activity due to affordability issues has been counter-balanced with the severe shortage in housing supply, and it is this that has helped to support prices.
“While at a national level house prices are standing firm, evidence suggests that the prime central London market is continuing to slow down. Many would like to blame Brexit but really it’s stamp duty – essentially a tax on mobility – which has put many buyers off.
“However, further slides in the pound and indices reporting steady growth post-Brexit, should make the UK property sector an attractive destination for foreign investment. I expect though that overseas buyers will take a cautious approach rather than rush in.”
Howard Archer, chief UK and European economist at IHS Global Insight, said the latest data reinforced his belief that house prices would remain “essentially flat” in the final quarter of this year. “While softer housing market activity is likely to limit house prices, we suspect that the current resilience of the economy and a shortage of properties will prevent prices from falling over the final months of 2016,” he said.