The Nationwide Building Society has reported that, after 15 successive monthly increases UK house prices were unchanged in October, after taking account of seasonal factors.
As a result, the annual rate of house price growth slowed to 4.6%, from 5.3% in September, though the Nationwide says this is still in line with the growth rates prevailing since early 2015.
Robert Gardner, Nationwide’s chief economist, said: “Measures of housing market activity remain fairly subdued, with the number of residential property transactions c10% below the levels recorded in the same period of 2015 in recent months. However, this weakness may still in part reflect the after-effects of the introduction stamp duty on second homes introduced in April, where buyers brought forward transactions to Q1 to avoid additional stamp duty liabilities. Policy changes impacting the Buy to Let market may also be playing a role in dampening activity.
“Data releases point to fairly stable demand conditions in the near term. Mortgage approvals edged up modestly in September, though they remain weak by historic standards. 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.
“UK house price growth has been remarkably stable over the past eighteen months, averaging c5%. While this is relatively modest by UK standards, it is still well in excess of average wage growth. Indeed, over the past three years, house prices increased by c.20% while wages have risen by c6%. 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.”
Ian Thomas, co-founder and director of online mortgage lender LendInvest, added: “We are starting to see activity pick up in the housing market. Sellers have become more realistic about the price they can achieve for their property since the Brexit vote, while the fall in the value of the pound has made UK property more attractive to international buyers. There is a lot of talk around the industry about the prospect of Stamp Duty being changed again in the Autumn Statement, which could provide a further boost.
“Landlords are particularly active at the moment, though their efforts are focused on refinancing rather than adding to their portfolios. With the stricter affordability requirements coming into force next year, many property investors are looking to remortgage now.
“There is a much reduced appetite to actually buy more properties – figures from the Royal Institution of Chartered Surveyors suggested almost nine in ten landlords have no intention to add to their portfolios this year.”