House prices show slight recovery in October: Nationwide

Despite 'extremely weak' activity, average UK house prices saw a slight increase in October, but remain lower than a year ago, according to this morning's report from Nationwide.

Related topics:  Property,  House Prices,  Nationwide
Property | Reporter
1st November 2023
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"Today’s figures show there is some light at the end of the tunnel for sellers, with a modest increase in prices after months of sluggish growth"
- Iain McKenzie - The Guild of Property Professionals

The latest data released by Nationwide has revealed a small but welcome step in the right direction for the UK property market, as average house prices rose from £257,808 in September to £259,423 in October. Yet despite the 0.9% increase on the month, average house prices are still down 3.3% on this time last year.

Robert Gardner, Nationwide's Chief Economist, said: “October saw a 0.9% rise in UK house prices, after taking account of seasonal effects. This resulted in an improvement in the annual rate of house price growth to -3.3%, from -5.3% in September.

“Nevertheless, housing market activity has remained extremely weak, with just 43,300 mortgages approved for house purchase in September, around 30% below the monthly average prevailing in 2019.

“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.

Supply remains tight

“The uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained. There is little sign of forced selling, which would exert downward pressure on prices, as labour market conditions are solid and mortgage arrears are at historically low levels.

“Activity and house prices are likely to remain subdued in the coming quarters. Despite signs that cost-of-living pressures are easing, with the rate of inflation now running below the rate of average earnings growth, consumer confidence remains weak and surveyors continue to report subdued levels of new buyer enquiries.

Bank rate

“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.”

Industry reaction

Matt Thompson, head of sales at Chestertons, says: “The recent price adjustment that some of the property market has seen, led to more house hunters continuing their search in October with sellers receiving an increasing number of offers that month. The vast majority of buyers have accepted that interest rates are here to stay and, after readjusting their budget or search criteria, are no longer willing to delay their property search any further.”

James Briggs, Head of Intermediary Sales at Together said: “A slight rise in house prices may not be enough to ward off predictions that house prices won’t recover until 20251, largely due to higher borrowing costs causing a slowdown in house sales.

“Looking ahead to the next year, we expect to see the overall housing market heavily influenced by the exit of more amateur buy-to-let landlords, as they consider whether lower yields against higher mortgage costs are worth the time, upkeep, and potential repair costs on a reduced margin.

“Whilst many of these properties may be snapped up by limited companies and professional or long-term BTL landlords, this trend may present an opening for first-time buyers, as the residential side of BTL is mainly made up of smaller, more affordable properties.

“Considering the expectation that the Chancellor could announce more support for first-time buyers in his Autumn Statement, the next couple of years could look more optimistic than initially thought for aspiring homeowners. For those interested in taking their first steps onto the property ladder, it’s worth speaking to a mortgage expert who can assess your situation.”

Tom Bill, Head of UK Residential Research at Knight Frank, said: “Sentiment in the UK housing market is weak but unlike the early months of Covid or the period following the mini-Budget, there is no single cause.

"There is financial pain from higher mortgage rates, hesitancy as the Bank of England struggles to contain inflation, and uncertainty as a general election looms and conflict persists in the Middle East.

"It means the seasonal bounce in activity didn’t happen this autumn, although price falls have been kept in check by weak supply. We expect UK prices to fall by 7% this year and 4% next year as inflation comes under control and mortgage rates stabilise.”

Iain McKenzie, CEO of The Guild of Property Professionals, says: “This time last year, the Chancellor was still doing damage control over the disastrous effects of the so-called ‘Mini Budget’. Homeowners and prospective buyers alike have both felt its impact over the past year.

“Today’s figures show there is some light at the end of the tunnel for sellers, with a modest increase in prices after months of sluggish growth.

“The average home still costs almost £9,000 less than it did this time last year according to Nationwide, but this readjustment in prices had been on the horizon for some time, as property values showed unprecedented growth throughout 2021 and 2022.

“Homeowners should feel reassured that their home is still worth significantly more than it did prior to the pandemic, and we are starting to see steady growth return once again.

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