Annual house price growth halves in September

The UK housing market currently has a very faint pulse and is holding on for dear life. Even the government new scheme to help first time buyers isn’t going to help as it directs first time buyers to new builds rather than the open market. A rate cut could help but the chances of that a becoming slimmer by the day. The only thing that will get this market moving is Stamp duty reform.

“Slower house price growth is little comfort if the monthly mortgage payment still puts the property out of reach.”

These figures suggest a cooling market, but a national average cannot capture the differences between individual areas or buyers’ circumstances. Slower price growth also does not mean prices are falling across the board.

From a mortgage perspective, the key question is whether buyers can afford the borrowing they need. Even where there is room to negotiate on price, the deposit, monthly repayments and lender’s affordability assessment can still determine whether a purchase is possible.

More realistic asking prices could help buyers, particularly first-time buyers. But sellers should price against local evidence, and buyers should establish their borrowing position before making offers. A softer market only creates an opportunity if the numbers work.

Slower price growth fits with the caution brokers and lenders have been describing to Bridging Loan Directory, but the time taken to sell is also affecting what happens next.

In one case we reported, a developer’s agreed site purchase was on hold because homes at an existing scheme had not sold. The money needed for the next project was still tied up in the last one.

That can put pressure on both sides of a transaction: an existing loan takes longer to repay, while the next purchase cannot proceed. Some lenders tell us enquiries remain active but deals are harder to structure; some brokers report fewer new approaches.

Nationwide’s figures show slower growth, rather than a collapse in prices. Our reporting highlights how even a market with relatively modest price movements can create difficulties when a sale takes longer than the borrower’s funding allows.

Growth halving sounds dramatic, but going from 1.6% to 0.8% is really a becalmed market moving sideways, and that matches what we see on the ground. Slower price growth doesn't actually help buyers the way the headline implies. What people can pay is set by the monthly payment and their borrowing capacity more than the asking price, so with rates where they are, near-flat prices leave affordability roughly where it was. The average also hides more than it shows. Northern Ireland up almost 6% against East Anglia falling, terraced homes rising while flats sit flat, those are dozens of local markets inside one number. Flats lagging is no surprise given the service charge, cladding and lease issues still weighing on them. So my reaction is fairly calm. This is a stalled market, and a stall is a long way from a slide. It stays that way until the monthly cost of a mortgage genuinely eases, whatever the headline growth does month to month.

I'm not at all surprised by these figures. Annual growth halving to 0.8% in a single month, with prices slipping 0.2% in September, confirms what the market has been showing for some time. There is a clear disconnect between what sellers believe their homes are worth and what buyers are willing, and able, to pay. The sooner sellers accept this is a buyer's market, the better for everyone. Price it right and it sells. Price it on hope and it sits. The official data and what we see on the ground are now telling the same story. Four regions are in annual decline, with East Anglia down 0.7%, London is barely moving at 0.4% and flats haven't budged in a year. With financial markets pricing in possible Bank Rate rises and mortgage rates under upward pressure, buyers are counting every pound and simply won't overstretch to meet an inflated asking price. Sellers holding out for last year's numbers risk chasing the market down, while those who adjust early will be the ones who get moved.

It appears that the slowdown in the market is now moving further and further down the ladder and is no longer restricted to higher value properties. This is reflected in both prices achieved as well as a wider downturn in buyer appetite reported to me from multiple contacts across the marketplace both inside and outside London.

This picture becomes even more stark when we take into account inflation which appears to only be going in one direction at what appears to be a faster rate. Consumers are under significant financial pressure and the cost of moving, cost of borrowing and cost of running a larger home is probably something being considered only by an ever smaller number of people.

The housing market is considered by many to be a good indicator of a wider economic outlook. Certainly the housing market slowdown is impacting related trades and service suppliers. Growth in every postcode will be hard to deliver if the housing market continues to dwindle.