House price growth slowest for more than five years

Annual house price growth has slowed to its lowest levels since May 2013, according to an index.

Nationwide Building Society said values increased by 1.6% annually in October, moving down from 2% year-on-year growth in September.

Across the UK, the average house price in October was £214,534.

House prices were at a standstill month on month – with a 0% change compared with September.

Robert Gardner, Nationwide’s chief economist, said: “October saw a slowdown in annual house price growth to 1.6% from 2% in September.

“As a result, annual house price growth moved below the narrow range of (around) 2% to 3% prevailing over the previous 12 months.

“However, this was broadly in line with our expectations, as the squeeze on household budgets and the uncertain economic outlook is likely to have dampened demand, even though borrowing costs remain low by historic standards and unemployment is at 40-year lows.

“We continue to expect house prices to rise by around 1% over the course of 2018.”

Mr Gardner said looking further ahead, much will depend on broader economic conditions.

He said: “If the uncertainty lifts in the months ahead, there is scope for activity to pick up throughout next year.

“The squeeze on household incomes is already moderating and policymakers have signalled that interest rates are only expected to rise at a modest pace and to a limited extent in the years ahead.”

Mr Gardner said there have been changes in the pattern of house sales over the past decade.

He said: “Cash purchases have remained buoyant during the recovery period. This is partly due to the growth of the private rental sector, where the majority of transactions are in cash.

“Demographic trends also partly explain this trend, where an increasing proportion of people own their homes outright and therefore transact in cash when they move.

“Recent years have seen a recovery in first-time buyer transactions, which are now broadly in line with pre-crisis levels.

“The improvement in credit availability, historically low interest rates, together with a steady improvement in labour market conditions in recent years have all helped boost activity.”

Meanwhile, activity among home-movers with a mortgage has been relatively subdued, he said.

“There has been a significant reduction in the number of buy-to-let purchases involving a mortgage in recent years, which reflects a softening in demand following tax changes and changes in underwriting standards.”

Howard Archer, chief economic adviser at EY Item Club, said: “At this stage, we expect a rise around 2.5% in 2019, on the assumption that the UK and EU ultimately agree a Brexit deal.

“We suspect that the housing market will be relatively lacklustre over the coming months – although there are varying performances across regions with the overall national picture dragged down by the poor performance in London and parts of the South East.”

Jeremy Leaf, a north London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: “We expect to see more balance but no fireworks in the period leading up to Christmas, which is traditionally quiet for the housing market.”

He continued: “First-time buyers are taking the place of investors, which will bring some welcome good news, particularly if sellers recognise the importance of negotiation.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Swap rates have fallen recently and we wait to see whether this will be passed on by lenders in the form of cheaper mortgage rates.

“Regardless, mortgages continue to be competitive as lenders compete for business in the run-up to the end of the year.”