Halifax October 23 house price index
The Halifax October house price index was published this morning. It shows average house prices rose by +1.1% in October, compared to a fall of -0.3% in September. Newspage sought the views of experts, below.
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12 responses from the Newspage communityCopy all
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Last week's base rate decision gave comfort to some but for most the misery continues. Prices are expected to carry on falling despite being supported by the lack of supply. The market is likely to bottom out soon and could then rebound with the first hint of a possible rate cut. Despite the Bank of England saying it will not be any time soon, I feel will come sooner than expected as Threadneedle Street will not want the economy to go into recession. We may get a cut next summer provided inflation has come back to target or not far off.
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Now not many people expected that. If you thought the Nationwide was a surprise, this was twice that. It highlights how the lack of supply, and growing demand, albeit slowly, are starting to feed back into average values. We shouldn't expect prices to rebound like this each month as that's highly unlikely but we may be close to the bottom now, if not already there.
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Don't be fooled by recent house price indices claiming average prices are rising. Averages lie. What I suspect they actually show is a higher proportion of transactions happening at the top end of the market, where there are more cash buyers, and a big drop off in transactions at the low-mid price range. This makes sense if you think about how unnaffordable it is for first-time buyers to purchase a home at the moment. So the average property transaction value is correctly reported as going up but misleadingly passed off by lenders as the average house price increasing. It's not. In my opinion, house prices are falling sharply across the board right now. And in all likelihood, will continue to do so throughout 2024.
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It's all about supply, and there's not much of it. Construction constraints, as seen in Monday's Construction PMI, coupled with predictions that interest rates have hit their peak are starting to see price stabilisation. Many buyers are sitting on their hands under the impression that prices will drop significantly, which is unlikely given supply constraints. Buyers holding out for prices to fall a lot more could find it backfires. This latest data from the Halifax certainly appears to suggest that. With the base rate being left on hold again last week, there is a chance prices may have bottomed or, at least, not be far off the bottom assuming inflation continues to fall.
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In Scotland, first-time buyers are definitely on the rise but many are now planning their house-buying for early 2024 rather than rushing for a pre-Christmas purchase. Many believe that the Bank of England's rate hold last week suggests rates may have peaked and it's this hope, rather than any national price data or forlorn expectations of house price crashes, that is currently boosting confidence in the Scottish property market. The usual supply/demand imbalance persists, and competitive closing dates are still the norm. This is especially the case in Glasgow and Edinburgh, with jaw-dropping percentages above valuations frequently still occurring. Buy-to-let remains stagnant, though and, with the dark nights now upon us, 2023 will likely end quietly. However, it feels likely that sparks, and possibly house prices, could be set to fly as soon as the Hogmanay fireworks and bells usher in 2024.
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Though this data suggests house prices are rising, I still expect activity levels to remain pretty flat now until the new year. Demand is still there but a lot of would-be buyers are still sitting tight hoping for further falls in prices, but they need to be wary based on this evidence. As we head into the festive period and new year, buyers may start to realise that prices have shown good signs of finding their true level already. The new year will likely show more house buyers return with gusto assuming inflation keeps its steady return to lower levels. I cannot see prices increasing for some considerable time to come, given that housing stock is in a much better place than a year ago and so plenty of it needs to change hands before demand starts to outstrip supply.
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It has been a miserable year for the property market and house prices have taken a hit. There are signs, though, that property prices may be bottoming out. In October, we saw a significant uptick in purchase enquiries, despite the cost of mortgage borrowing, with buyers feeling more empowered than they have for a long time and sensing their opportunity to grab a bargain. There certainly won't be fireworks in the property market during the next six months but activity levels will slowly start to recover. The real catalyst in jump-starting the property market will come from the increasing pressures on mortgage lenders to reprice downwards. They need to get money changing hands again. With the Autumn Statement approaching, the market needs to correct itself without more artificial props.
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After last week's Nationwide house price curveball, we've got another. The lack of supply is certainly pivotal to these upticks in house prices but demand is also picking up as more and more buyers sense a bargain. First-time buyers in particular are in a strong position and know that they hold a lot of bargaining power at present. The stupendously high cost of renting is also encouraging them to buy even though mortgage rates are much higher than what they were. Nobody is expecting a spectacular recovery in the property market but predictions of further drops of 10% and above are starting to ring hollow.
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Considering the fact that only 7% of UK housing was built in this millennium, it’s no surprise to see a lack of supply propping up prices. In fact, the UK has some of the lowest levels of housing in Europe, which indicates that high prices are likely to stay. Given that 70% of mortgage debt is also held by the top four income deciles, it’s unlikely that high mortgage rates will lead to a mass sell-off in properties. And with the Bank of England also pricing in more rate cuts going into 2026 with weaker GDP forecasts, swap rates should continue to come down and provide further relief on the demand side. This should see a bottom in house prices coming soon.
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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. The first sound each year of Mariah Carey also starts to see activity levels drop off but, as in previous years, we are expecting a busy January. Top of my own Christmas list is the Government making clear what their intentions are on Stamp Duty. Buyers certainly don't need rumours of another SDLT holiday to use as an excuse for not proceeding with their plans to move home.
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The base rate being held shows things are going in the right direction on the inflation front. What it doesn't take into account is the fact that property sales have bottomed out. When lenders readjust their prices to be competitive, properties will be bought again and lift inflation up slightly. They threw a rock into a pond and are now ignoring the ripples it made. We will be in this up and down for a bit longer I think. Property prices will reflect this. Hopefully, the government or lenders will find a way to help first-time buyers back into the market and give them the affordability they need.
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Mortgage rates staying the same or even improving slightly with house prices not really doing much all points to a period of calmness and stability. This just feels like what the market was like pre-Covid and that's fine. Runaway growth doesn't help first-time buyers get on the ladder and is only good for property developers and the banks.