The UK housing market showed signs of cooling in September, as the average price of a home grew by 0.2 per cent on an annualised basis, down from 0.6 per cent in August, according to a recent house price index by Nationwide.
Homes were estimated to cost £215,352 on average, as a result. The figures represented a marked slowdown from September 2018, when average house prices were growing by 2 per cent annually.
A weaker global economy and Brexit uncertainty were cited as possible reasons for the overall slowdown, with different regions diverging during the month.
London outpaced by other regions
London continued to underperform in comparison to other UK regions, as average prices in the capital fell by 0.7 per cent in Q3 on an annual basis, taking the average house price to £460,686, the most expensive of any region.
In contrast, regions with lower average house prices continued to see modest growth. In the North region, where average house prices were estimated to be £127,570, prices grew by 1.8 per cent in the last 12 months.
Northern Ireland saw the fastest price growth of any region, at an annual rate of 5.2 per cent in the third quarter. Average house prices were estimated to have grown to £144,053 as a result.
Nationwide estimated that annual earnings were catching up with the cost of housing, as their house-price-to-earnings ratio continued to decline in September, despite remaining at levels significantly above the long-run average.
Weakness despite fundamentals
The weakness of the UK housing market in September came despite a number of housing market fundamentals being apparent, including a low supply of new properties, which would support a trend of higher prices.
Earlier this week, the Ministry of Housing, Communities and Local Government (MHCLG) reported that housebuilding had fallen short of the government’s own housebuilding target.
The government’s Spring Statement intended for at least 300,000 new homes to be built per annum by the mid-2020s, but actual housebuilding had totalled 173,600 new homes in the 12 months to June this year.
Robert Gardner, chief economist at Nationwide, explained: “Indicators of UK economic activity have been fairly volatile recently, but the underlying pace of growth appears to have slowed as a result of weaker global growth and an intensification of Brexit uncertainty.”
This week, Brexit negotiations with the European Union appeared to be on the verge of breaking down, just weeks before a major EU summit. Parliament was also prorogued for the second time this year on Tuesday 8th October for just under a week, in preparation for the next Queen’s Speech, to be held on Monday, 14th October.
Despite the added pressure of Brexit uncertainty, Mr Gardner added: “The underlying pace of housing market activity has remained broadly stable, with the number of mortgages approved for house purchase continuing within a fairly narrow range, prevailing over the last two years.”
He concluded that healthy labour market conditions and low borrowing costs appeared to be offsetting the drag from the uncertain economic outlook.