Introduction: UK house prices fall 4.7% in year to September
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The downward pressure on house prices is likely to last into next year, lender Halifax has warned this morning, after reporting that UK house prices fell for the sixth month running in September.
The average property price fell by 0.4% last month, Halifax reports, a smaller fall than in August when it shrank by 1.8%. That extends a fall in prices, month-on-month, which began in April.
On an annual basis, prices fell by 4.7%, an acceleration on August’s 4.5% drop, and the biggest annual fall since August 2009 (when they fell -5.5%).
Recent house price falls mean the averge UK home has now dropped to levels seen in early 2022, at around £278,601.
They’re now 1% above their level in December 2021, when the Bank of England started raisig interest rates – but almost £40,000 above their pre-pandemic levels.
Prices have cooled following the jump in mortgage rates in 2022 and 2023. And although mortgage costs have fallen recently, demand from buyers may remain weak until rates fall further.
Kim Kinnaird, director of Halifax Mortgages, explains:
“Activity levels continue to look subdued compared to recent years, with industry data showing lower levels of new instructions to sell homes and agreed sales. Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability. Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.
However, with Base Rate now likely to be at or around its peak, we are seeing fixed rate mortgages deals ease back from recent highs. Wage growth also remains strong, which has helped with affordability, with the house price to income ratio now at its lowest level since June 2020 (6.2 in September vs 6.3 in August).
Many economists and financial markets predict that Base Rate will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s 2% target. Overall, these factors are likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year.”
Also coming up today
Financial investors worldwide are bracing for the latest US jobs report, due at lunchtime UK time.
September’s non-farm payroll is expected to show a small slowdown in hiring, with around 170,000 new hires, down from 187,000 in August.
But a strong report might alarm markets, as it would encourage America’s central bank, the Federal Reserve, to raise interest rates again.
The agenda
-
7am BST: Halifax house price index for September
-
9am BST: UN Food price index
-
1.30pm BST: US non-farm payroll for September
Key events
Jeremy Leaf, north London estate agent, reports that business is “bumping along at a new, lower level”.
Buyers and sellers are encouraged partly by expectations of lower interest rates, Leaf says, while rising rents are making it more expensive in the lettings market.
Leaf also points out that Halifax’s data is based on approved mortgages, so doesn’t catch cash buyers:
These figures, though historically reliable, look at mortgage approvals rather than completions, while the country’s largest lender doesn’t include cash purchasers either, which make up an increasingly important part of the market.
There is more financial pain ahead for the housing market, points out Tom Bill, head of UK residential research at Knight Frank, as mortgate holders roll off existing fixed-rate deals and face higher borrowing costs.
Commenting on today’s Halifax house price report, Bill says:
The fact rising interest rates have caused a house price correction was predictable but the extent of the recent volatility was not. The combination of the mini-Budget and fourteen consecutive rate rises have taken their toll on demand but buyers and sellers should return in greater numbers as a sense of stability returns.
The financial pain entering the system will continue next year as people roll off fixed-rate deals, but there will be an improvement in sentiment, that vital lubricant in the housing market.
We therefore think most of the UK’s house price correction will happen this year and modest single-digit annual growth will return after the next general election.”
Alice Haine, personal finance analyst at investment platform Bestinvest, predicts the housing market will remain “subdued” until 2024, saying:
“The decline in Britain’s property market accelerated in September, according to the latest Halifax House Price Index, with prices falling 4.7% on the year, a faster slide than August’s 4.5% as affordability challenges dampened buyer demand and sellers increasingly slashed asking prices to secure a sale.
The monthly data was also downbeat with prices falling 0.4% in September, albeit at a slower pace than August’s 1.8% drop, taking the average price of a home to £278,601. The housing market is expected to remain subdued into the next year as the drag effect from the Bank of England’s 14 interest rate hikes delivers a heavy blow to affordability levels. While some buyers have been forced to reduce the size and value of the home they purchase to afford mortgage repayments, others are abandoning moving plans altogether.
There is some reason for optimism in the market, however. Mortgage rates have eased over the summer from their July peak with the average two-year fixed rate now below the 6.5%* mark and the average five-year fixed rate nudging below 6% as interest rate expectations improve and lenders compete more aggressively for business.
House prices under greatest pressure in South East England
House prices have fallen in all UK nations and the nine English regions, on an annual basis.
They’re falling fastest in the South East of England, and slowest in Northern Ireland.
Halifax reports:
Prices are under the greatest downward pressure in the South East of England, falling by -5.7% over the last year (average house price of £376,450). Northern Ireland currently has the most resilient house prices, down by just -0.2% compared to this time last year (average house price of £184,108), a fall of less than £400.
Scotland also experienced a relatively modest annual decline of -0.8% (average house price of £201,594). Wales saw property prices fall by -3.6% over the last year (average house price of £214,585).
London remains the most expensive place in the UK to purchase a home, with an average property price of £525,678.
With prices down by -4.8% over the last year, it has seen the biggest fall of any region in cash terms (-£26,514).
Avg house prices fell for the 6th consecutive month in Sep 23 by -0.4% to £278,601, a -4.7% drop annually. All regions registered declines but Northern Ireland remains the most resilient, down by only -0.2% whilst the South East is the most exposed dropping -5.7% @HalifaxBank pic.twitter.com/QEgzJj6EOx
— Emma Fildes (@emmafildes) October 6, 2023
Introduction: UK house prices fall 4.7% in year to September
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The downward pressure on house prices is likely to last into next year, lender Halifax has warned this morning, after reporting that UK house prices fell for the sixth month running in September.
The average property price fell by 0.4% last month, Halifax reports, a smaller fall than in August when it shrank by 1.8%. That extends a fall in prices, month-on-month, which began in April.
On an annual basis, prices fell by 4.7%, an acceleration on August’s 4.5% drop, and the biggest annual fall since August 2009 (when they fell -5.5%).
Recent house price falls mean the averge UK home has now dropped to levels seen in early 2022, at around £278,601.
They’re now 1% above their level in December 2021, when the Bank of England started raisig interest rates – but almost £40,000 above their pre-pandemic levels.
Prices have cooled following the jump in mortgage rates in 2022 and 2023. And although mortgage costs have fallen recently, demand from buyers may remain weak until rates fall further.
Kim Kinnaird, director of Halifax Mortgages, explains:
“Activity levels continue to look subdued compared to recent years, with industry data showing lower levels of new instructions to sell homes and agreed sales. Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability. Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.
However, with Base Rate now likely to be at or around its peak, we are seeing fixed rate mortgages deals ease back from recent highs. Wage growth also remains strong, which has helped with affordability, with the house price to income ratio now at its lowest level since June 2020 (6.2 in September vs 6.3 in August).
Many economists and financial markets predict that Base Rate will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s 2% target. Overall, these factors are likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year.”
Also coming up today
Financial investors worldwide are bracing for the latest US jobs report, due at lunchtime UK time.
September’s non-farm payroll is expected to show a small slowdown in hiring, with around 170,000 new hires, down from 187,000 in August.
But a strong report might alarm markets, as it would encourage America’s central bank, the Federal Reserve, to raise interest rates again.
The agenda
-
7am BST: Halifax house price index for September
-
9am BST: UN Food price index
-
1.30pm BST: US non-farm payroll for September
