Taylor Scott International News
UK house prices increased by 0.3% in October but the annual pace of growth has slowed to 9%, according to the latest index from the Nationwide Building Society. It is the third month in a row when annual growth had moderated and according to Robert Gardner, Nationwide’s chief economist, housing market activity levels have remained relatively weak in recent months. He pointed out that the number of mortgages approved for house purchase in September was almost 20% below the level prevailing at the start of the year and 27% below the long term average. Similarly, housing market turnover rates are well below long term averages. For example, the number of mortgage transactions is currently equal to around 4% of the housing stock, well below the long run average of 6%. ‘There is something of a disconnection between the slowdown in the housing market in recent months and broader economic indicators, which have remained relatively upbeat. While cooling in the London market is a part of the story, this is unlikely to be main explanation for the slowdown,’ he said, adding that in the third quarter of the year 10 of the 13 UK regions saw the pace of annual price growth slow and two regions saw quarterly price declines. This comes against a background where the labour market has continued to improve, with employment rising strongly and the unemployment rate falling sharply in recent months. Moreover, indicators of consumer sentiment remain elevated, where healthy rates of retail sales growth and new car registrations also suggest that households are feeling more confident. ‘Affordability does not appear overly stretched, at least at the UK level, with first time buyers continuing to represent an unusually high proportion of mortgage activity and with typical mortgage payments as a share of average income close to the long run average,’ Gardner explained. ‘Historically low mortgage rates have helped to mitigate against the fact that house prices have been outstripping income growth. Forward looking indicators, such as new buyer enquiries point to further softness in the near term,’ he said. ‘However, if the economy and the labour market remain in good shape and mortgage rates do not rise sharply, activity is likely to pick up in the quarters ahead,’ Gardner added. According to Graham Davidson, managing director of Sequre Property Investment, the moderation has been felt most acutely in London where the rate of growth is beginning to slow thanks largely to more stringent lending criteria. ‘Another factor is a slowing in demand as many begin to look at property outside the capital due to its extortionate prices. The region is, however, still leading the way in terms of growth and house price rises,’ he said. ‘There is certainly an element of seasonality behind this slow down, but we feel that this decrease in the rate of growth could signal the start of a slowing property market. The impact of the Mortgage Market Review (MMR) should not be underestimated. As Nationwide reports, the… Taylor Scott International
Taylor Scott International, Taylor Scott
