"House price growth fell to ‘just’ 10% in the year to August. This is still exceptional growth given the economic trauma that the UK has been through."
House prices rose by 0.1% month-on-month, after taking account of seasonal effects. As a result, house prices remain around 13% higher than before the pandemic began.
The data also shows a mixed picture for house price growth across the country in Q3. While price growth accelerated in Wales, Northern Ireland and Scotland, most English regions recorded a slowdown.
Wales was the strongest performing region with house prices up 15.3% year-on-year – the highest rate of growth since 2004. Price growth remained elevated in Northern Ireland at 14.3%. House price growth in Scotland picked up to 11.6% in Q3, in contrast to the previous quarter when it was the weakest performing part of the UK (at 7.1%).
England saw a slowing in annual house price growth to 8.5%, from 9.9% in Q2.
Price growth in northern England continued to exceed that in southern England. Yorkshire & Humberside was the strongest performing English region for the second quarter in a row, with prices up 12.3% year-on-year, followed by the North West, which saw an 11.4% rise.
London was the weakest performer, with annual growth slowing to 4.2% from 7.3% last quarter. The surrounding Outer Metropolitan region, which includes places such as Luton, Watford, Sevenoaks and Woking, also saw a softening to 6.8%, down from 8.2% in Q2.
Robert Gardner, Nationwide's chief economist, said: “As we look towards the end of the year, the outlook remains uncertain. Activity is likely to soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax. Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises as government support winds down, as seems likely.
“But this is far from assured. The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic – such as wanting more space or to relocate – to continue to support activity for some time yet.”
Jonathan Hopper, CEO of Garrington Property Finders, commented: “After three months of recalibration the property market resembles a half-drunk cappuccino – still hot but the froth has gone.
“Rush triumphed over reason in May and June as buyers raced to complete before England’s phased withdrawal of the Stamp Duty holiday. Since then, with the tax incentive all but over, the market has calmed – both in terms of activity and price rises.
“With average prices rising by just 0.1% in September, gone are the days of sellers being able to raise prices almost by the week. In some parts of the country the balance of power is swinging back towards buyers, with the market splitting into a new set of ‘three d’s’ – determined buyers set on moving by Christmas, desire-led buyers who are keen to relocate to the coast or country and the discretionary buyers who are willing to watch and wait.
“The market is still very healthy by historical standards, but there’s one notable cloud on the horizon – the lack of homes for sale is starting to throttle supply. On the front-line we're now seeing some sellers delay putting their own home on the market because of the limited choice of homes to move to.
“Such caution is acting as a brake on supply and forcing many estate agents to compete hard to win sellers’ business. After the boom of the summer, a long winter could lie ahead for some in the property sector.
“Record low interest rates and robust buyer demand, combined with the patchy availability of homes for sale, is set to keep pushing up prices – albeit more gradually. With supply likely to stay constrained until the New Year, the traditional Spring bounce feels a long way off.”
Anna Clare Harper CEO of property consultancy SPI Capital, said: "House price growth fell to ‘just’ 10% in the year to August. This is still exceptional growth given the economic trauma that the UK has been through. House prices have been boosted by the temporary stamp duty relief, which is now tapering down, and widely available and cheap finance.
"Banks are offering mortgages of up to 100% to aspiring homeowners, competing against each other to offer lower rates. And for investors, there are circa 3,000 lending products available. Competition for customers is high, and with so many attractive products available, it’s no surprise that affordability is becoming stretched.
"You only have to look back by a week to the Evergrande crisis to see that borrowing too much has consequences. For those considering their next property purchase, it’s important to remember one thing: just because you can borrow to acquire property with a low deposit, or at an initially low interest rate, it doesn’t mean you should. Both capital and interest repayments must be paid.
"That said, with rising construction costs, it’s likely that the UK continues to suffer from a shortage of housing stock, which in turn means prices are expected to continue to grow."
Sundeep Patel, director of sales at Together, added: “With the modest slowdown in annual house prices to 10.0% in September, from 11.0% in August, it’s widely felt UK house prices peaked at the height of summer and will now start to stabilise as we move into the Autumn.
"Government support and tax reliefs certainly helped to inflate house prices this year, and in some areas, demand is still at record levels. However, with Stamp Duty and furlough winding up, and the Bank of England deliberating to whether to raise interest rates, the bubble created by frenzied property buying is soon likely to pop.
"That said, demand for buy-to-let has been on the rise in certain regions lately, as property investors bid to capitalise on local prices doing well in the post-pandemic market.
“Even with the prospect of activity calming, there will be a widening gap for specialist lenders to cater to the ever-changing financial needs of borrowers.”
