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House prices fell 0.9 percent month-on-month in October, after taking account of seasonal effects. This is the first such fall since July 2021 and the largest since June 2020. The average house price has also fallen from a UK average of £272,259 in September 2022 to £268,282 in October 2022.
Commenting on the latest figures, Robert Gardner, Nationwide’s Chief Economist, said the property market has been impacted by the mini-Budget which led to a sharp increase in interest rates.
He continued: “Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.
“For example, the increase in mortgage rates meant that a prospective first-time buyer (FTB) earning the average wage and looking to buy a typical FTB home with a 20 percent deposit would see their monthly mortgage payment rise from c.34 percent of take-home pay to c.45 percent, based on an average mortgage rate of 5.5 percent.
“This is similar to the ratio prevailing before the financial crisis. The market looks set to slow in the coming quarters.
“Inflation will remain high for some time yet and Bank Rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures.
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However, despite a sharp slowdown in annual house price growth, property experts and agents are still reporting strong demand for homes.
Matthew Thompson, Head of Sales at Chestertons, said their branches registered the same volume of enquiries as October 2021.
He said: “October’s property market was very much dictated by the avalanche effect of September’s Mini-Budget announcement.
“Buyers were facing the reality of higher interest rates and mortgage providers withdrawing a number of products, which created a new sense of urgency. This has led to house hunters rushing to finalise their purchase, resulting in a 53 percent increase in the number of exchanges compared to October last year.”
“Despite economic uncertainty, buyer demand seemed undeterred as our branches registered the same volume of enquiries as in October 2021.
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“This shows yet again that, compared to the national picture, London’s property market has its very own rhythm and remains a key destination for buyers and investors alike.”
James Forrester, Managing Director of Barrows and Forrester, agreed and said despite there being “panic” in recent weeks, they are seeing “not let up from buyers on the ground”.
He said: “There remains a far greater appetite for homeownership than the available housing stock to satisfy it.
“While this remains the case, any fears of a property market crash can be firmly put to bed and we expect to see house prices continue to increase on an annual basis throughout the remainder of the year, albeit at a more measured pace, as has already been the case in recent months.”
Nathan Emerson, Chief Executive of Propertymark, the UK professional body for estate agents, said agents are also reporting more homes for sale which is giving buyers more choice compared to the last two years.
He added: “They no longer have a fear of losing out on a property and can therefore be more level-headed with the offers they’re putting forward, which will naturally see a softening in prices being achieved over the next few months.”
Director of Benham and Reeves, Marc von Grundherr, said a reduction in house price growth should be “largely welcomed”.
“The monumental levels of house price appreciation seen throughout the pandemic market boom just simply aren’t sustainable and it’s far better the market steadily returns to normality, rather than crashing back down to earth with a bump,” he added.
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