House prices rose by an average of 4% on an annual basis in September, according to the latest House Price Index from Halifax. This is higher than the year-on-year increase recorded in August (2.6%), and the highest rate since February.
On a quarterly basis, house prices in the last three months (July-September) were 1.4% higher than in the previous quarter – the fastest price growth on this measure since February.
Month-on-month, the average price rose by 0.8% between August and September, following a 1.5% increase in August. The average property value is now £225,109.
The report also shows that total UK home sales remained flat in August, but still exceeded 100,000 for the eighth consecutive month.
Mortgage approvals fell by 2.7% between July and August to 66,580, after rising to their highest level since January. Mortgage approvals have remained in a narrow range between 65,100 and 68,700 per month over the last 11 months.
New sales instructions have improved, however, but are still close to an all-time low. A shortage of homes for sale continues to impede market activity, with the balance of new sales instructions down for the 18th consecutive month in August. The average stock level on estate agents’ books edged up, but still remains close to a record low.
The Managing Director of Halifax Community Bank, Russell Galley, says: “While the quarterly and annual rates of house price growth have improved, they are lower than at the start of the year. UK house prices continue to be supported by an ongoing shortage of properties for sale and solid growth in full-time employment. However, increasing pressure on spending power and continuing affordability concerns may well dampen buyer demand. There has been recent speculation on the possibility of a rise in the Bank of England base rate. We do not anticipate this will have a significant effect on transaction volumes.”
The Founder Director of independent estate agent James Pendleton, Lucy Pendleton, also comments on the data: “The back-to-school bounce in September is likely the cause of this substantial rebound in growth. It is an annual trend which sees a backlog of transactions brokered in the summer months complete in September once everyone comes back from holiday.
“What that often means is that the prices attached to those transactions reflect where the market was much earlier in the year, when prices were higher. On the face of it, this rate of annual growth shoots the market right over the head of inflation, with a healthy 1.1% gap, and means homeowners are no longer living in an investment that is losing money in real terms.
“You would think this data would instill much more confidence among sellers, but, actually, this seasonal distortion is quite misleading and you could see price growth soften just as quickly in the coming months.
“In London, we are currently seeing many more price reductions at bigger discounts compared with last year. A vendor who commits to a significant price reduction one week is selling the next. This will provide some comfort to first time buyers, who are desperate to see prices come back down to Earth rather than take off again, particularly in the capital.”
Jonathan Samuels, the CEO of lender Octane Capital, responds: “The price growth we’re seeing is bittersweet, driven by weak supply more than consumer confidence and economic strength.
“Structural supply problems, a shortage of properties for sale and a robust jobs market are keeping the property market afloat. Even if rates are hiked this year or in early 2018, the consensus is that they are unlikely to rise more than quarter of a percent.
“The stakes are simply too high and the economic backdrop too uncertain for anything more than a nominal rise in interest rates. Since any rate rises will be limited, the impact on transaction volumes may indeed be negligible in the near term.
“It’s when rates start creeping towards and above 1% that we are likely to see confidence hit. That’s when things start to change and when prices could come under increased pressure.
“Despite the overall positive numbers from the Halifax, the property market is still in a limbo and will remain there while a number of key political and economic factors play out. In 2018, the narrative of a sideways-moving market with relatively low transaction levels and buyers in the driving seat is likely to continue.”
Russell Quirk, the Founder and CEO of online estate agent eMoov.co.uk, gives his thoughts: “No signs of an autumnal cold snap where UK house price growth is concerned and, in fact, the UK market seems to be enjoying somewhat of an Indian Summer, with the highest quarterly growth rate since February and the highest average house price on record.
“It seems more than apparent that the UK market has found its feet and is starting to gain momentum again. This momentum is unlikely to regress, despite the ongoing spectacle of Britain leaving the EU. In addition, while an increase in interest rates seems very likely over the coming months, they are already at such a low level that any increase is likely to be marginal and insignificant when it comes to impacting or deterring buyers.
“With the ongoing issue of building supply, UK homeowners can be assured the price of their property will remain stable as we head towards 2018.”
And finally, Ishaan Malhi, the CEO and Founder of online mortgage broker Trussle, says: “A double-blow could be about to hit aspiring homeowners in the coming months. Not only have house prices started to creep up again across the country, but lenders have also begun to slowly increase their rates. If the Bank of England does raise the base rate in November, as expected, buyers are going to be in for a particularly tough time, so anyone thinking about purchasing their first home should get moving if they can.
“For those that already own a home, property price rises are on the face of it good news, but it’s astounding just how many are on the wrong mortgage rate and could be wasting some of those gains on unnecessarily high mortgage payments. Anyone in this situation should take a look at the best fixed rates out there at the moment, many of which are still the lowest in living memory, and lock into a low rate before the Bank of England makes its move.”