Latest movement in house prices surprises some experts
The average price of a UK house rose by 1.1% or almost £3,000 to £281,974 in October compared to the previous month, Halifax has reported.
The latest rise in house prices ended the streak of six consecutive monthly falls, surprising some industry experts. However, house prices are still down by 3.2% year on year, though the decline was at a slower pace than the 4.5% annual fall recorded in September.
“Prospective sellers appear to be taking a cautious attitude, leading to a low supply of homes for sale,” Kim Kinnaird, director at Halifax Mortgages, commented on the latest Halifax House Price Index. "This is likely to have strengthened prices in the short-term, rather than prices being driven by buyer demand, which remains weak overall. While many people will have seen their income grow through wage rises, higher interest rates and wider affordability pressures continue to be challenges for buyers. Across the medium-term, with financial markets not anticipating a decline in the Bank of England’s base rate soon, we expect house prices to fall further overall – with a return to growth from 2025. The current picture should continue to be seen in the context of the longer-term house price trend as, on average, prices remain around £40,000 above pre-pandemic levels.”
Meanwhile, Malcolm Davidson, director at Hull-based mortgage broker UK Moneyman, admitted that "few expected that house prices would return to growth again at this time. The property market has once again showed its ability to surprise, I’m not seeing many buyers sitting on their hands waiting for property values to fall, but some are certainly still waiting for the return of lower fixed rate mortgages. But given that the Bank of England has stated twice in the past three months that interest rates are likely to remain high until inflation is well and truly behind us, that could well be a long wait.”
For Rich Horner, head of individual protection at insurance firm MetLife, said "the latest rise in house prices may see buyers pause on immediate purchase plans this year. With major lenders forecasting UK house prices will continue to slide this year, and not start to recover until 2025, there may be less activity ticking over for the foreseeable,” he pointed out. “However, that doesn’t remove the considerations around higher mortgage and rent payments – both of which are continuing to dominate the lion-share of millions of people’s take-home pay.”
Alex Lyle, director of Richmond estate agency Antony Roberts, added that "while there is a good level of stock available, anything coming onto the market now needs to be priced at the right level as there is no depth of demand in terms of enquiries compared with the start of the year. Our business is all about confidence, and two consecutive holds in interest rates are extremely welcome, helping buyers plan for the future. Transactions are taking time and negotiations can be drawn out. But there are opportunities for buyers who are brave enough not to sit on the fence with an autumn window where competition is more muted and vendors more realistic.”
Nationwide reveals the latest on UK house prices
What do these figures indicate?
The average price of a UK home increased by 0.9% to £259,423 in October from £257,808 in September, the Nationwide Building Society has reported. While house prices remain lower than last year, the annual rate of house price growth improved to a less negative -3.3% last month from -5.3% in September.
“October saw a 0.9% rise in UK house prices, after taking account of seasonal effects,” Robert Gardner, chief economist at Nationwide Building Society, commented on the figures in the latest Nationwide House Price Index. “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. The uptick in house prices in October most likely indicated 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.
Borrowing costs are unlikely to return to the historic lows seen in the aftermath of the pandemic with the Bank of England rate not expected to decline significantly in the years ahead. 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.”
For James Briggs, head of intermediary sales at specialist lender Together said "the slight rise in house prices may not be enough to ward off predictions that house prices won’t recover until 2025, 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.”
Nicky Stevenson, managing director at estate agent group Fine & Country, said "the recovery in house prices in October was boosted by a pause in interest rates in September. The Bank of England’s surprising decision to hold off on a rate hike in September was a relief for hesitant buyers, who were waiting for economic stability before committing to a purchase,” she explained. “All eyes will be on tomorrow’s announcement to see if the pause was a fleeting respite. If we see another pause in rate rises tomorrow, it should provide an extra boost to autumn sales, as sellers recognise this as a prime listing opportunity.”