UK property market cools; average house prices fall

UK housing market cooled in September as the market was hit by soaring mortgage rates, according to new data by Halifax.

The 0.1 percent drop is the second marginal decrease of the past three months as the pace of annual growth also slowed down, returning to single digits for the first time since January, Halifax said.

According to the mortgage lender, property sales have fallen through at the fastest rate since the Covid-19 housing market shut down thereby reducing borrowing costs affordability. Halifax indicated the market had been almost flat since June but was now heading into a more significant slowdown as rapidly rising borrowing costs made buying a property unaffordable for more people.

“The housing market may have already entered a more sustained period of slower growth,” said Kim Kinnaird, the director at Halifax Mortgages. “The prospect of interest rates continuing to rise sharply amid the cost of living squeeze, plus the impact in recent weeks of higher mortgage borrowing costs on affordability, are likely to exert more significant downward pressure on house prices in the months ahead.”

The annual rate of growth fell further to 9.9 percent in September, from 11.4 percent in August. "Predicting what happens next means making sense of the many variables now at play, and the housing market has consistently defied expectations in recent times.”

“While stamp duty cuts, the short supply of homes for sale and a strong labour market all support house prices, the prospect of interest rates continuing to rise sharply amid the cost of living squeeze, plus the impact in recent weeks of higher mortgage borrowing costs on affordability, are likely to exert more significant downward pressure on house prices in the months ahead,” Kinnaird noted.

“This will undoubtedly be a cause of some concern for homeowners, but the unprecedented rate of property price inflation we’ve seen in recent years has been far above the historic average. It’s important to look at slower growth in this context — since the start of the pandemic average property values have risen by around +23 percent (almost £55,000) with detached house prices up by more than £100,000 over the same period,” she added.

In the meantime, the August 2022 RICS UK Residential Survey results point to the recent downward trend in market activity becoming further entrenched, with enquires, sales and new instructions all falling at a faster pace (in net balance terms) than July 2022.

London still has the slowest rate of annual growth amongst the UK nations and regions, with house prices rising by 8.1 percent over the last year. With a typical home costing £553,849, the capital’s average property price remains by far the most expensive in the country. Halifax said a typical UK property now costs £293,835 as the pace of annual growth slows down for the third month in row.

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