House prices take summer dip – Nationwide
Higher mortgage costs appear to have pushed average UK house price growth lower in August, Nationwide claims.
The latest Nationwide House Price Index for August shows annual house price growth slowed from 2.4% to 2.1% and was down 0.1% on a monthly basis.
That puts average UK house prices at £271,079.
Commenting on the figures, Robert Gardner, Nationwide’s chief economist, said:
“August saw a slight softening in the rate of annual house price growth to 2.1%, from 2.4% in July. Prices dipped by 0.1% month on month, after taking account of seasonal effects.
“The relatively subdued pace of house price growth is perhaps understandable, given that affordability remains stretched relative to long-term norms. House prices are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.
“Combined with the fact that mortgage costs are more than three times the levels prevailing in the wake of the pandemic, this means that the cost of servicing a mortgage is also a barrier for many. Indeed, an average earner buying the typical first-time buyer property with a 20% deposit faces a monthly mortgage payment equivalent to around 35% of their take-home pay, well above the long run average of 30%.”
He remains optimistic though, adding:
“Affordability should continue to improve gradually if income growth continues to outpace house price growth as we expect. Borrowing costs are likely to moderate a little further if Bank Rate is lowered again in the coming quarters. This should support buyer demand, especially since household balance sheets are strong and labour market conditions are expected to remain solid.”
Nationwide’s research also shows that more than half of properties in the owner occupier sector are classified as ‘underoccupied’
Tom Bill, head of UK residential research at Knight Frank, said:
“House prices have drifted lower since March as the market digests higher rates of Stamp Duty and supply continues to outstrip demand. Steady mortgage rates mean transaction numbers have improved over that time but the recent property tax speculation risks sending both sales and prices lower as buyers and sellers deal with pre-Budget uncertainty for the second year in a row.”
Matt Thompson, head of sales at Chestertons, added:
“Last month, buyers used the holidays to review their finances, refine their search criteria and to view homes they already shortlisted.
“The number of properties coming onto the market has decreased, however. Whilst there was a substantial increase in landlords selling up amid the Renters’ Rights Bill earlier this year, it was a momentary uplift that has now rebalanced. As a result, buyers will find it more challenging to secure a property within their budget and are advised to start their property search as early as possible.”
Nathan Emerson, chief executive at Propertymark, said:
“It is encouraging to see that house prices remain resilient at a time when the housing market has seen turbulence, very much influenced by the current economic backdrop.
“There are, however, many positive factors to reflect upon: we have witnessed a drop in the number of fall-throughs, a trend that demonstrates an uplift in the number of property transactions completed, and the number of overall listings reaching an all-time high.
“There are challenges ahead, however, such as increasing the supply of new sustainable homes, providing assistance to first-time buyers, and for lenders, ensuring that the latest drop in interest rates translates into more affordable mortgage products.”
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