UK house prices rise in October – but see an annual fall

UK house prices rose by 0.9% in October – but the annual rate of house price growth remained negative at -3.3%, the latest figures from Nationwide reveal.

The average UK house price is still lower than it was a year ago and now stands at £259,423.

Nationwide’s chief economist, Robert Gardner, attributed the monthly increase in house prices to a shortage of properties on the market, and there is little evidence of forced selling by homeowners.

He also says that housing market activity has remained very weak, with mortgage approvals for house purchase at around 30% below the monthly average in 2019.

‘Affordability remains stretched’

Mr Gardner said: “This is not surprising as affordability remains stretched. Market interest rates, which underpin mortgage pricing, have moderated somewhat but they are still well above the lows prevailing in 2021.”

He added that consumer confidence is low and demand for housing is subdued, with cost-of-living pressures easing but that’s not enough to boost spending power.

Mr Gardner is also predicting that house prices and activity will remain subdued in the coming quarters, as borrowing costs are unlikely to fall significantly.

He said: “With Bank Rate not expected to decline significantly in the years ahead, borrowing costs are unlikely to return to the historic lows seen in the aftermath of the pandemic.

“Instead, it appears likely that a combination of solid income growth, together with modestly lower house prices and mortgage rates, will gradually improve affordability over time, with housing market activity remaining fairly subdued in the interim.”

‘Monthly rate of house price growth’

The chief executive of Yopa, Verona Frankish, said: “An increase in the monthly rate of house price growth, however incremental, demonstrates that the nation’s homebuyers still have an appetite to transact, even in tough market conditions.

“Of course, higher borrowing costs continue to dampen the market to an extent, with fewer buyers taking the plunge and property values remaining off the record pace set last year.”

She adds: “However, it appears as though the recent decision to freeze interest rates has helped boost market confidence and with the potential of a reduction on the cards this week, we could see a stronger finish to the year than many would have previously anticipated.”

‘Previous decision to freeze interest rates’

The managing director of Barrows and Forrester, James Forrester, said: “While the previous decision to freeze interest rates would have been warmly welcomed by the nation’s struggling homebuyers, it hasn’t been enough to relight the touchpaper with respect to current market performance, albeit it has spurred a marginal monthly increase in property values.

“This is largely due to the fact that the cost of borrowing remains substantially higher and this has continued to restrict both the number of buyers entering the market with the help of a mortgage, as well as their purchasing power.

“The result of this reduction in buyer activity has been a stagnation of house prices and we can expect this air of lethargy to remain hanging over the market for the remainder of the year, at the very least.”

‘Current performance of the UK property market’

The director of Benham and Reeves, Marc von Grundherr, said: “It really remains a case of ‘nothing to see here’ when it comes to the current performance of the UK property market.

“Yes, the rate of house price growth has stalled in recent months, but at the same time, we’re yet to see any meaningful reduction in property values materialise.

“With the countdown to Christmas now on, the likelihood is that the market will remain in a state of house price limbo until January, at which point the usual uptick in activity should help spark some life back into proceedings.”

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