House price growth eases in September, affordability worsens
Annual house price growth eased in September, according to data from lender Nationwide on Thursday, as affordability became more stretched.
On an annual basis, growth fell back to 10% in September from 11% in August with the average price of a home “little changed” at £248,742, compared to £248,857.
As a result, house prices remained about 13% higher than before the Covid-19 pandemic began in early 2020.
Looking at the third quarter as a whole, Nationwide said Wales and Northern Ireland were the strongest performing regions, with London the weakest.
Wales saw house prices rise 15.3% year-on-year, making for the highest rate of growth since 2004, while price growth remained elevated in Northern Ireland at 14.3%.
House price growth in Scotland picked up to 11.6% in the third quarter, in contrast to the prior quarter, when it was the weakest performing part of the UK at 7.1% growth.
England saw a slowing in annual house price growth to 8.5%, from 9.9% in the second quarter.
Price growth in the North, North West, Yorkshire and Humberside, and the East and West Midlands continued to exceed that in the southern regions of London, Outer Metropolitan, Outer South East, East Anglia and the South West.
The cost of a typical mortgage as a share of take-home pay, meanwhile, was above the long-run average in 10 of the 13 UK regions, up from one region before the pandemic.
“House prices have continued to rise more quickly than earnings in recent quarters, which means affordability is becoming more stretched,” said Nationwide chief economist Robert Gardner.
“Raising a deposit remains the main barrier for most prospective first-time buyers.
“A 20% deposit on a typical first-time buyer home is now around 113% of gross income - a record high.”
Gardner said that due to the historically low level of interest rates, the cost of servicing a typical mortgage was still well below the levels recorded in the run-up to the financial crisis, but even on that measure, affordability was becoming more challenging.
“Recent price patterns suggest an element of rebalancing is occurring where most of the regions that have seen the strongest price growth are those in which affordability is still close to or below the long run average.”
Gardner said that looking towards the end of the year, the outlook remained uncertain, with activity likely to soften for a period after the stamp duty holiday expires at the end of September.
Additionally, underlying demand was likely to soften around the end of the year if unemployment rises as government support winds down.
“But this is far from assured.
“The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic - such as wanting more space or to relocate - to continue to support activity for some time yet.”