Residential property prices in the UK increased by 0.1% in September, taking the average price of a home to £214,024, according to the latest index to be published.
But there was a slight quarter on quarter fall of 0.1% although prices are still up 5.8% compared to a year ago, down from 6.9% in August, the data from the Halifax also shows.
However, it is the lowest yearly growth since August 2013 when it was 5.4% and the lowest quarterly rate since November 2012 when it fell by 0.3%. Martin Ellis, the Halifax’s housing economist pointed out that the quarterly rate of change has been on a downward trend since reaching 3% in February.
‘The quarter on quarter change is a more reliable indicator of the underlying trend. 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,’ he said.
‘The reduction in annual house price growth from a peak of 10% in March to 5.8% six months later remains in line with our forecast at the end of 2015. A lengthy period where house prices have risen more rapidly than earnings has put pressure on affordability, therefore constraining demand,’ Ellis explained.
He added that very low mortgage rates and a shortage of properties available for sale should, however, help support price levels over the coming months.
Indeed, the UK’s stock of homes available for sale fell for the third month in a row in August, according to data from the Royal Institution of Chartered Surveyors (RICS) and remains around the lowest levels ever recorded.
However, commentators believe that it is a seasonal slowdown and like Ellis believe that demand will keep the market ticking over for the rest of the year. Ben Madden, managing director of the estate agents Thorgills, pointed out that the slump predicted due to the decision to leave the European Union has not materialised.
‘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,’ said Madden.
‘Sellers and buyers alike will already have an eye on Article 50 and its potential to be another bump in the road. But again, who it favours is as yet unknown. The pendulum of market power could swing either way. We’re in a kind of no-man’s land where both buyers and sellers have their own reasons to stand firm. As a result, transaction levels have slowed up,’ he added.
Nicholas Finn, executive director of Garrington Property Finders, pointed out that price rises have eased gradually and in the three months following the Brexit vote, the average property dipped in value by just 0.1%.
‘At present prices are being supported by the combination of resilient consumer confidence and a chronic shortage of homes for sale. With prices plateauing and interest rates at record lows, we’re seeing strong intent but a lack of clarity among buyers,’ he said.
He also pointed out that the headline figures mask the fact that there are 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,’ he said, adding that a further drop in Sterling could attract more overseas buyers, especially in London.
Rob Weaver, director of investments at property crowdfunding platform Property Partner, also believes that prices will remain solid until the end of the year, but added that 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,’ he said.
‘With record low interest rates and a continuing lack of homes for sale, prices look likely to remain fairly solid until the end of the year. Recent surveys showing renewed consumer and business confidence after the EU referendum is also cause for optimism,’ he added.
