Low housing supply keeps prices steady

17 November 2017

Much like last month, property prices are continuing to go up – albeit at a fairly slow pace – especially when looking at properties that have been sold and have completed, as is the case with the UK House Price Index for September from the Office for National Statistics.

It’s interesting to see that Rightmove – which examines the asking prices of properties on its portal – has seen buyers being a bit more conservative with their pricing strategy as we head towards the festive season, with new properties typically priced at -0.8% – or £2,392 less –than in October.

With the Budget coming up on 22 November, older homeowners looking to downsize will be waiting to see whether Chancellor Philip Hammond will do anything to reduce the amount of stamp duty to encourage more movement in the housing market.

A recent report published by the London School of Economics suggests that cutting stamp duty or eliminating it altogether for pensioners looking to downsize would help rebalance the market.

Key stats at a glance

  • UK House Price Index for September 2017: House prices up by 5.4% annually. Average price of a UK property: £226,367. Monthly change: +0.4%.
  • Halifax House Price Index, October 2017: House prices up by 4.5% annually. Average price of a UK property: £225,826. Monthly change: +0.3%.
  • Nationwide House Price Index, October 2017: House prices up by 2.5% annually. Average price of a UK property: £210,801. Monthly change: +0.2%.
  • Rightmove House Price Index, November 2017: Asking prices up by 1.8% annually. Average asking price of a UK property: £311,043. Monthly change: -0.8%.

Note: See Methodology below for how the data for each index is calculated.

The latest figures from the UK House Price Index (UK HPI) for September show an annual price rise of 5.4% over the year, which means the average property in the UK costs £226,367.

Prices have risen by 5.7% in England, with a monthly rise of 0.6% since August and an average property price of £243,945.

In Wales, property prices went up by 5.3% annually and by 0.6% since August 2017, with the average price now £152,661.

London saw the lowest annual house price growth – at 2.5% and was the only region to witness a monthly price fall – of 0.2%.

Paul Smith, chief executive of haart estate agents, points out that London’s declining house price growth is misleading, as property prices are still more than many can afford.

He says: “Although London price growth is falling behind the rest of the country, prices are still hitting record heights, far surpassing both inflation and wage growth. The average London buyer still has to pay £12,000 more to own a home than the same time last year, and £262,000 more than the average buyer across the rest of the country. Hardly evidence of a market that is suffering.”

Like last month, the North West was the region with the biggest annual and monthly house price rises, at 7.3% and 2.1% respectively.

Nick Leeming, chairman at estate agent Jackson-Stops, comments: “It’s full steam ahead for house price growth in the North West, with average prices up more than 7% year on year in September.

“The region, which is home to major cities including Manchester, Liverpool and Chester, has risen up the ranks in terms of annual house price growth, surpassing the likes of the East Midlands and the East of England, which have performed exceptionally well across 2017.

“With the average house price in the North West around £100,000 less than across England as a whole, is it not surprising to see buyers turning their attention to the region’s property stock. The increase in demand means we will likely see accelerated growth here in 2018,” he adds. 

Market is in ‘rude health’

Halifax reveals that house prices in the three months to October were 4.5% higher than in the same quarter a year ago. It reports that house prices were up by 0.3% since September with the average price now £225,826 – the highest on record and 2.8% higher than in January (£219,741).

Russell Galley, managing director, Halifax Community Bank, says: “The fact that the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate, continues to support house prices and is likely to do so over the coming months. Increasing pressure on household finances and continuing affordability concerns are some of the factors likely to dampen buyer demand. That said, we do not anticipate the base rate rise will be a barrier to buying a house.”

Commenting on Halifax’s data, Lucy Pendleton, director of estate agent James Pendleton, says: “We've since had a rate rise, but what you're seeing isn't one last hurrah as people rush to grab the best mortgage rates. It's that same old ball and chain around the UK property market's neck – weak supply.

“The countdown on rates may have helped support demand, but mortgage approvals were down. We know stiff competition for homes exists, but to see approvals and prices diverge in such dramatic fashion is surprising.

"There will also be an echo from September's back-to-work bounce, as deals brokered before the summer holidays complete in the autumn, but such a strong second month is uncharacteristic and shows the market in surprisingly rude health."

Base rate rise will have ‘modest’ impact

Nationwide reports that the annual rate of house price growth picked up slightly in October to 2.5%, from 2.3% in September, but with a monthly rise of just 0.2%.

Robert Gardner, Nationwide's chief economist, says: “Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appears to be weighing on confidence. The lack of homes on the market is providing support to house prices.  

Commenting on the impact of a rate rise, he adds: “The proportion of borrowers directly impacted by a rate rise will be smaller than in the past, in part because the vast majority of new mortgages in recent years were extended on fixed interest rates.

He points out that a 0.25% rise in rates will probably have just a modest impact on most borrowers who are on variable rates.

“On the average mortgage, an increase of 0.25% would increase monthly payments by £15 to £665 (equivalent to £180 a year),” he points out.

Autumn price cuts

Rightmove reports that new sellers on its property portal have cut their prices to temp buyers. Prices of properties that are new on Rightmove are, on average -0.8% – or £2,392 less – than in October.

Miles Shipside, a director and housing market analyst at Rightmove, says: “In the run-up to the festive season, many sellers are trying to tempt distracted buyers to look at their property by dangling the bauble of more attractive pricing given the quieter time of year and more challenging market. The effect is an impromptu Autumn sale, with the largest proportion of sellers on the market having reduced their initial asking prices at this time of year since 2012.” 

But Mr Shipside believes there’s room for sellers to slash their prices further.

He points out that Rightmove’s analysis of more than 100,000 properties that were sold found that properties which sell, typically generate over 40% more online interest in the first three weeks than those that do not sell.

He says: “The danger of going too high at the outset is that you jeopardise that vital initial three-week period, and may have to start on a series of price reductions while potential buyers watch and assume that no one is buying your property because something is wrong with it other than the price.

“An average reduction of over 6% means that some properties will be considerably more over-priced than that, and such a big margin of error in the initial price of many properties that come to market can leave them stale and unsold.”


Halifax House Price Index – This UK-wide index is based on the house purchase price at the mortgage approval stage. It calculates the annual change as an average for the latest three months compared with the same period a year earlier as it says its figures provide a better picture of the underlying trend compared to a monthly year-on-year number as they smooth out any short-term fluctuations.

Nationwide House Price Index – The data for this index for the whole of the UK is drawn from Nationwide’s house purchase mortgage lending at the post-survey approvals stage.

Rightmove House Price Index – The data is compiled from the asking prices of properties when they first come on to the market via over 13,000 estate agency branches listing on Rightmove.co.uk. The sample includes up to 200,000 homes each month – representing circa 90% of the market.

UK House Price Index – The UK HPI uses house sales data from HM Land Registry, Registers of Scotland, and Land and Property Services Northern Ireland and is calculated by the Office of National Statistics.

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