In the past year, increasing house prices have been a regular talking point, especially for Londoners. With prices hitting new records, many are becoming concerned over a potential property bubble, but according to Nationwide, September saw the first decrease in prices in 17 months.
The average property to buy in the UK now costs £188,374, over £16,000 more compared to last year. However, recent figures suggest the UK is seeing the housing market take a turn in the opposite direction. The latest House Price Index released by Britain’s biggest building society Nationwide, states that the average house in the UK fell by 0.2% last month. Furthermore, they outlined that September was the first month since April 2013 that the price of an average UK home decreased.
The recent month on month readings have fluctuated dramatically which can provide misleading information. Although the latest monthly statistics currently indicate a cool down in the market, quarterly figures provide a more accurate representation and offer a more reliable source of predicting near future readings. Nationwide have said “While September saw a slowing in house price growth, the picture on a quarterly basis (July, August and September combined) was still relatively strong, with all thirteen UK regions recording annual price gains.” Essentially, although prices in September decreased, the trend over the past three months shows that prices have increased by 1.5%, indicating it may be too hasty to conclude the property market is now calming.
Despite the recent decline, these figures do not take regional variation into account. Since last year, London house prices have increased by nearly 20% whereas the UK as a whole saw prices increase by only 9.4%. Robert Gardner, Nationwide’s Chief Economist said that “There remains significant regional variation however, with the South of England still seeing the strongest rates of growth.”
Britain’s housing market has been cooling since regulators invoked lenders to take tighter affordability checks and capping the amount that could be lent to potential borrowers. This is clearly having its effects on buyers as a statement on Monday from the Bank of England says that mortgage approvals had fallen to a three-month low. A separate report from ‘Your Move’ indicates that, the number of first time buyer completions is up by 7% since August last year. However, their report states that possible interest rate increases are concerning first time buyers. If interest rates were to rise before a pick-up in wages and income, highly indebted households could become more vulnerable.
Although the latest month on month figures state that the current UK house prices are decreasing, it is unfair to say so based on the quarterly figures. Nationwide have forecast a further slowdown in the final three months of 2014. Gardner said, “There have been tentative signs from surveyors and estate agents that buyer demand may be starting to moderate, but the low level of interest rates and strong labour market suggest that underlying demand is likely to remain robust.”