UK house prices rose at their fastest rate for eight months in September as buyers shrugged off Brexit uncertainty and fears of a slowdown in consumer spending, according to one of Britain’s biggest mortgage lenders.
The latest Halifax house price survey showed a 4% price rise in the three months to September compared with the same period last year, up from a 2.6% annual rise in August and the highest figure since February. This bucked the trend of other recent reports which suggested a weakening housing market, especially in London.
Over the month, house prices rose by 0.8% in September to an average of £225,109, the highest on record. Although this was down on the 1.5% increase seen the previous month, it was far better than the 0.1% rise that had been expected by analysts.
Halifax said a squeeze on spending and rising prices could stifle future demand, but it believed that the housing market was unlikely to be badly affected by any future interest rise by the Bank of England.
Russell Galley, the managing director of Halifax Community Bank, said: “While the quarterly and annual rates of house price growth have improved, they are lower than at the start of the year.
“UK house prices continue to be supported by an ongoing shortage of properties for sale and solid growth in full-time employment. However, increasing pressure on spending power and continuing affordability concerns may well dampen buyer demand. There has been recent speculation on the possibility of a rise in the Bank of England base rate. We do not anticipate this will have a significant effect on transaction volumes.”
The economist Samuel Tombs of Pantheon Macroeconomics said the Halifax survey was out of line with other reports: “The sudden surge in Halifax’s measure of house prices … is impossible to reconcile with all the other housing market evidence. Halifax’s measure is the most volatile of all the indices we track; the standard deviation of month-to-month changes over the last four years has been two and three times higher than for the official and Nationwide indices, respectively.
“Other surveys show that the pipeline of demand is soft; Rics [the Royal Institution of Chartered Surveyors] has reported that new buyer inquiries have fallen in six of the last seven months. Real wages still have further to fall over the next six months and mortgage rates will rise soon in response to the increase in banks’ funding costs.”
Falling house prices in London were helping to fuel growth in other parts of the country, said Jonathan Hopper, managing director of Garrington PropertyFinders. “Momentum remains patchy and what growth there is is wavering rather than sustained, and prices remain under intense pressure in several key regions,” he said.
“In London, prices have been sliding in many of the areas that saw the frothiest rates of growth during the boom.
“On the flipside, the flight of equity from the capital is fuelling activity in several regional markets where affordability and perceived value for money is now enticing higher volumes of buyers.”
Other housing market experts warned that the market could weaken in the coming months. Lucy Pendleton, founder director of the independent estate agents James Pendleton, said: “The back-to-school bounce in September is likely the cause of this substantial rebound in growth.
“It is an annual trend which sees a backlog of transactions brokered in the summer months complete in September once everyone comes back from holiday. What that often means is that the prices attached to those transactions reflect where the market was much earlier in the year, when prices were higher.
“You would think this data would instil much more confidence among sellers but actually this seasonal distortion is quite misleading and you could see price growth soften just as quickly in the coming months.”
She said London sellers were having to cut their asking prices to get sales: “In London, we are currently seeing many more price reductions at bigger discounts compared with last year. A vendor who commits to a significant price reduction one week is selling the next.”