House Prices Remain Unchanged In September
UK house prices in September remained resilient, defying expectations of a decline. The average price of a home remained consistent at £257,808, despite predictions of a 0.4% drop. This consistency followed two months of price reductions, with the annual decline standing at 5.3%, matching the rate of August.
This stability in the housing market may be attributed to recent shifts in the financial landscape. The surge in mortgage rates, which had been a concern for potential buyers and investors, showed signs of abating. Robert Gardner, Nationwide's Chief Economist, highlighted that investors have adjusted their forecasts regarding the Bank Rate's trajectory. This comes as underlying inflationary pressures in the UK's economy seem to be waning. If this trend persists, it could alleviate the strain on those considering buying a home or remortgaging.
One of the pivotal indicators bolstering this sentiment is the average borrowing rate on a five-year fixed-rate deal, which dipped below 6% for the first time since early July. This rate drop is significant, as earlier in the summer, borrowing rates had skyrocketed, putting immense pressure on British households. Current Bank of England data indicates that interest rates on new mortgages are now over three times their levels at the start of 2022.
A look back reveals that house prices have declined by 5.8% (equivalent to £15,943) from their zenith in August 2022, based on Nationwide's metrics. Most economic analysts anticipate an overall decline nearing 10%, suggesting that the market may already be past its midpoint in this downturn. Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics, believes that this downturn in house prices may be nearing its end. According to him, the market is on the cusp of a recovery.
Interestingly, amidst these shifts, sales of flats have been more robust than other property types. This might be attributed to the growing demand for more affordable housing options, as buyers grapple with stretched finances. Yet, it's noteworthy that flats also witnessed the most significant year-on-year decline in the quarterly data released by Nationwide.
Regionally, London witnessed a softening in its price slump. The capital recorded a 3.8% decline in the third quarter year-on-year, a slight improvement from the 4.3% drop in the preceding quarter. Contrasting this, the South West emerged as the most impacted region, with prices plummeting by 6.3% in the third quarter. Conversely, Northern Ireland stood out as the strongest region in this period.
These evolving dynamics in the UK's housing market present a multifaceted picture, with various factors influencing regional and national trends. With the potential easing of property price declines, it seems that the upcoming general election could see Prime Minister Rishi Sunak leveraging these positive signs in the housing sector.