UK property growth was flat in October, latest index data shows

The annual rate of house price growth in the UK slowed to 4.6% from 5.3% in October with values flat month on month, the latest national housing index shows.

The Nationwide index says this take the average price of a home to £205,904 and suggest that the introduction of a 3% stamp duty surcharge on additional properties in April may still be having an effect.

Robert Gardner, Nationwide’s chief economist, pointed out that after 15 successive monthly increases UK house prices were unchanged in October after taking account of seasonal factors although annual growth is still in line with the growth rates prevailing since early 2015.

‘Measures of housing market activity remain fairly subdued, with the number of residential property transactions around 10% below the levels recorded in the same period of 2015 in recent months,’ he said.

‘However, this weakness may still in part reflect the after effects of the introduction stamp duty on second homes in April when buyers brought forward transactions to avoid additional stamp duty liabilities. Policy changes impacting the buy to let market may also be playing a role in dampening activity,’ he added.

He also pointed out that the data points to fairly stable demand conditions in the near term. Mortgage approvals edged up modestly in September, though they remain weak by historic standards while surveyors report that new buyer enquiries have increased modestly in recent months.

‘While the economic outlook is uncertain, solid labour market conditions and historically low borrowing costs should provide support to buyer confidence. Moreover, the relatively low number of homes on the market and modest rates of housing construction are likely to keep the demand/supply balance fairly tight, even if economic conditions weaken in the quarters ahead, as most forecasters expect,’ Gardner explained.

He added that over the past three years house prices have increased by around 20% while wages have risen by around 6% and as a result the typical house now costs six times average earnings, up from 5.3 times earnings in 2013.

‘However, the steady decline in borrowing costs over the same period has helped to lessen the impact on affordability for home buyers. Indeed, the typical mortgage payment expressed as a share of average take home pay is little changed over the period and is still in line with the long run average,’ he concluded.

Commentators believe there is no need to think that the housing market is about to see a tumble. ‘The labour market is strong, supply is still low and buyer confidence hasn’t dissipated. Some will use these latest figures as evidence that the Brexit vote is finally feeding through to the housing market,’ said Alex Gosling, chief executive officer of online estate agents House Simple.

‘The fallout from the EU referendum doesn’t seem to be at the front of buyers’ minds, although that could change as we get closer to Article 50 being triggered early next year. There are still plenty of people looking to purchase, but it just feels like an overpriced market has finally taken its toll. Property transactions are down on levels we would normally expect this time of the year and it may be that buyers are simply taking a breather until the New Year,’ he added.

There is sustained stability in the property market, according to Rob Weaver, director of investments at property crowdfunding platform Property Partner. ‘The housing supply shortage alongside a growing population, low unemployment, and record low interest rates, has continued to prop up prices,’ he said.

He believes that while uncertainty over the Brexit negotiations could further exacerbate the supply crisis with house builders pausing activity, this would, in the longer term, increase pressure on prices.

‘Buyer enthusiasm has been dampened, perhaps partly due to the difficulty in securing mortgages, but decision making, in our opinion, has merely been delayed rather than cancelled,’ he explained.

‘Even with a softening in the market, London and the South East are still the powerhouse driving the housing market. The impact of Crossrail has been significant, particularly on the West of the route, with top performers Reading and Slough seeing much stronger than average rates of house price growth since the project was announced,’ he added.

Jonathan Hopper, managing director of Garrington Property Finders, believes that one month of stagnant prices is neither a surprise nor a cause for panic but it is an indication of how much of a buyer’s market it has become.

‘Prices in the immediate aftermath of the referendum were flattered by an injection of pent-up demand as buyers who had sat on the fence in the run up to the referendum finally got off it. But with the impact of that temporary prop now fading, the buyers who remain are feeling empowered to ask for a substantial discount in return for the certainty of a sale,’ he pointed out.

‘Yet pragmatism rather than panic prevails among sellers, which has so far prevented wholesale price cutting. Prices are also being supported by a chronic shortage of supply in many areas, but the shift in the balance of power from seller to buyer is palpable. Reassured by rock bottom interest rates, a robust labour market and an economy that continues to grow steadfastly, intent remains strong among domestic buyers,’ he said.

‘With the prices of super prime property falling sharply, we’re also seeing a surge in demand from foreign buyers. Sterling is close to its lowest level against the Dollar for three decades, prompting increasing numbers of astute overseas buyers to pounce,’ he added.

One major hurdle ahead is the triggering of Article 50 to start the process of the UK leaving the EU which will take place by March 2017 and Mario Berti, head of Octopus Property, believes that this will test consumer and business sentiment all over again.

‘Factor in the US election and elections on the continent and you have all the ingredients for uncertainty. What we negotiate with Europe will arguably shape the medium and long term performance of the UK property market,’ he said.