According to the Nationwide House Price Index[i], annual house price growth remained in double digits for the fifth month in a row in September but eased back to 10.0% from 11.0% in August (chart of the month). Prices were little changed in month-on-month terms, up by a mere 0.1%. Overall, despite ongoing double-digit growth, momentum has eased since the start of summer, though prices remain c13% higher than before Covid began in early 2020. The latest Nationwide House Price Index[ii] also sheds light on Q3 price activity. By region, Wales (15.3%), Scotland (11.6%) and Northern Ireland (14.3%) were strong performing regions in Q3, while London was the weakest (+4.2%). Overall, price growth in most English regions recorded a slowdown in Q3, and price performance in northern England continued to exceed that in southern England (Yorkshire & Humberside + 12.3%, Northwest 11.4% vs. London’s Metropolitan region +6.8%). As a result of price rises, affordability has taken a hit.
Chart of the month: Monthly UK house price, annual % change
Source: Nationwide House Price Index, Blend Network[iii]
Market Commentary
- Regional UK house price activity showed a fairly mixed picture in Q3[iv]: Wales was the strongest performing region with house prices up by 15.3% year-on-year – the highest growth since 2004. Q3 price growth also remained high in Northern Ireland (+14.3%) and picked up in Scotland (+11.6% vs. 7.1% in Q2 when it was the weakest UK region). London, on the other hand, was the weakest performer, with annual growth slowing to 4.2% from 7.3% in Q2. It’s metropolitan region, which includes places such as Luton, Watford, Sevenoaks and Woking, also saw a softening to 6.8%, down from 8.2% in Q2.
- The overview offered by the Nationwide House Price Index is slightly different with the one offered by the Halifax House Price Index[v]: annual house price inflation accelerated to 7.4% in September, up from 7.2% in August. In month-on-month terms, UK house prices rose by 1.7% in September (the sharpest increase since February 2007), adding more than £4,400 to the value of the average UK property. However, the regional house price snapshot is in line with that of Nationwide’s: Wales recorded the strongest house price growth of any UK region, + 11.5% in September, while Scotland also continued to outperform the UK national average, with growth of 8.3%.
- Another interesting highlight is the affordability data. House prices have continued to rise more quickly than earnings in recent quarters, which means affordability is becoming more stretched. Raising a deposit remains the main barrier for most prospective first-time buyers. According to Nationwide, a 20% deposit on a typical first-time buyer home is now around 113% of total gross income – a record high[vi].
- Elsewhere, HMRC’s property transactions data for UK home sales increased in August. The seasonally adjusted estimate of UK residential transactions was up by 20.8% year-on-year and by 32.0% month-on-month in August 2021, showing a significant uptick in transactions[vii].
Property Market News & Data
- The latest Bank of England reports show that mortgage and savings rates remain at rock bottom, with some savings rates at record lows. The Bank of England reported that average savings rates have dropped to below 0.1% with August’s figures reporting lows of just 0.09%. New fixed rate accounts are showing averages of just 0.29%[viii].
- Construction material prices have continued to increase with the supply chain crisis meaning cement, plasterboard and insulation are being rationed by manufacturers[ix]. According to Jewson, soaring demand for certain products and supply shortages has forced to put prices up (+10-15% for wheelbarrows, +5-20% for sealants, adhesives and chemicals, +12% for glass wool insulation and +20% for MDF mouldings)[x].
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[i] Source: https://bit.ly/3BfnoQx
[ii] Source: https://bit.ly/3BfnoQx
[iii] Source: https://bit.ly/3AjzGpP
[iv] Source: https://bit.ly/3BfnoQx
[v] Source: https://bit.ly/3mwTKQz
[vi] Source: https://bit.ly/3ahUrYu
[vii] Source: https://bit.ly/3oDjFJ9
[viii] Source: https://bit.ly/3oDjFJ9
[ix] Source: https://bit.ly/3BfnoQx
[x] Source: https://bit.ly/3BfnoQx
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