House price round-up November 2016: market 'resilient'

18 November 2016
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House prices in the UK continued to rise in September, but at a slower rate than the previous month, according to the latest UK House Price Index (HPI).

The UK HPI – which uses data from property transactions recorded by the Land Registry – found that property prices went up by 7.7% over the year to September, compared to 8.4% in August.  Monthly house prices rose by just 0.2%, putting the average property price in the UK at £217,888.

Londoners have seen the biggest monthly rise in house prices at 1.4%, with the average price now £487,649. Over the year, house prices were up by 10.9% in the capital.

 

However, it was the East of England where the greatest annual increase in average property values were seen – up by 12.1%.

In contrast, the property market was not so buoyant up north. In the North East, annual price growth was the lowest in the UK – at 1.5%. Meanwhile, monthly house prices in the region were down by 1.9%,

Home sales in the UK dropped by 4.3% between August and September, with levels remaining lower than in 2014, 2015 and before the stamp duty changes in early 2016.

In a similar vein to August, the report said that September’s housing market has shown “a period of relative stability”. However, it said that there was evidence of regional variation with a marked slowdown in activity in London and surrounding areas, with other areas of the UK faring better.

Commenting on the UK HPI, Rob Weaver, a director at crowdfunding platform Property Partner, says: “Despite the predictions, the ceiling hasn’t fallen in post-Brexit with house prices remaining fairly stable – a clear sign of resilience in the market.

“London and the East of England are still top of the housing leader board with annual price rises in double digits. It’s a reflection of a widening divide with the North, although September’s figures for the South East show an unusual dip, somewhat of a monthly aberration to past performance.

“The North East continues to lag the rest of the country with prices falling by nearly 2% in September, reducing annual growth to just 1.5%.”

 

Annual growth remains “robust”

Halifax, the UK’s largest mortgage lender, which looks at mortgage valuations, also reported a fairly static picture for the three months to October 2016, revealing that house price growth was just 5.2% higher than the same quarter in 2015. This was down on both August’s (6.9%) and September’s figures (5.8%). Halifax put the average house price in October at £217,411.

Martin Ellis, Halifax housing economist, says: “Activity levels, like house price growth, have softened compared with a year ago. Home sales, however, appear to have stabilised in recent months following the distortions earlier in the year due to the changes to stamp duty in April.

“Annual house price growth has nearly halved from a peak of 10% in March this year, but remains robust at 5.2%. This expected slowdown appears to have been largely due to mounting affordability pressures, which have increasingly constrained housing demand.

“While house price growth may ease further in the coming months, very low mortgage rates and a shortage of properties available for sale should help support price levels.”

Nationwide’s house price index for October was a little more pessimistic, reporting annual house price growth of 4.6%, as compared to 5.3% in September. It put the average house price at £205,904.

 

Robert Gardner, Nationwide's chief economist, says: “After 15 successive monthly increases, UK house prices were unchanged in October (after taking account of seasonal factors).

“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.

“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 the first quarter to avoid additional stamp duty liabilities. Policy changes impacting the buy-to-let market may also be playing a role in dampening activity.
 

Affordability issues

Mr Gardner adds: “UK house price growth has been remarkably stable over the past 18 months, averaging around 5%. 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 around 20% while wages have risen by 6%. As a result, the typical house now costs six times average earnings – up from 5.3 times earnings in 2013.

Looking at average prices of properties marketed on its portal over the past month, Rightmove reports that prices of properties coming on the market have fallen by 1.1% – or £3,452 – in October.

Rightmove points out that this is a smaller drop than the 1.8% average over the past six years – a sign of a “resilient market”.

But first-time buyers are still facing affordability issues: properties of two bedrooms or fewer went up by 1.3% (£3,256) over the month.

Miles Shipside, Rightmove’s director and housing market analyst, says: “As well as helping people’s homeownership aspirations, activity at the bottom rung of the ladder helps the rest of the market to move and through that boosts the wider economy.

“Short-term options that might be top of a first-time buyer’s list would be a stamp duty holiday exclusive to them. However, there are dangers to increasing demand unless this is matched by policies to improve supply, and more radical steps need to be taken to remove some of the barriers preventing more affordable homes to buy and rent from being built in the right locations.”

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