The latest figures from the Land Registry Office, which are also out today (Fri 28 Nov) shows that prices rose 0.7% over the last month in London, although they fell in exclusive Kensington and Chelsea, which is popular with foreign investors
Annual Growth in the UK housing market has fallen for the third month running and now stands at 8.5%, down 0.5% on October, according to new figures from the Nationwide building society.
The fall comes despite the fact that house prices rose on average by 0.3% month-on-month in November to reach a new record of £189,388, just £50 higher than the previous month.
However, October figures from the Land Registry Office, which are also out today, shows prices are almost £4,000 off the high and they are falling in the exclusive London borough of Kensington and Chelsea, which is popular with foreign investors.
The declining London market is only part of the reason for the decline in the growth figure, which is the lowest for 11 months, says Nationwide’s Chief Economist, Robert Gardner.
“The annual pace of house price growth continued to soften in November, falling from 9.0% in October to 8.5%, marking the third consecutive month where annual growth has moderated. This is despite house prices increasing by 0.3% month on month in November.
“Housing market activity levels have remained relatively weak in recent months. The number of mortgages approved for house purchase in September was almost 20% below the level prevailing at the start of the year and 27% below the long-term average. Similarly, housing market turnover rates are well below long-term averages. For example, the number of mortgage transactions is currently equal to around 4% of the housing stock1 – well below the long-run average of 6%.”
Howard Archer, IHS Global Insight’s Chief Economist, says high property prices are putting off some buyers and market growth is likely to remain lower, until interest rates rise again.
“With housing market activity appreciably off its early-2014 highs, we suspect house prices will generally rise at a much more sedate rate over the coming months compared to the peak double-digit annual growth rates seen earlier this year.
“Looking ahead, significant restraint on house buyer interest is expected to come from more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the prospect that interest rates will eventually start to rise in 2015.
“Many people may also be deterred from buying houses because they look pricey in a number of areas after recent sharp rises.”
Improvements in the economy should help strengthen activity, although demand looks set to remain weak for some months to come, agrees Mr Gardner.
“There is something of a disconnect between the slowdown in the housing market in recent months and broader economic indicators, which have remained relatively upbeat. While cooling in the London market is a part of the story, this is unlikely to be main explanation for the slowdown (indeed, in Q3, 10 of the 13 UK regions saw the pace of annual price growth slow and two regions saw quarterly price declines).
“In particular, the labour market has continued to improve, with employment rising strongly and the unemployment rate falling sharply in recent months (at 6% in the three months to September, the unemployment rate is well below the 7.6% prevailing over the same period last year). Moreover, indicators of consumer sentiment remain elevated, where healthy rates of retail sales growth and new car registrations also suggest that households are feeling more confident.
“Forward looking indicators, such as new buyer enquiries point to further softness in the near-term. However, if the economy and the labour market remain in good shape and mortgage rates do not rise sharply, activity is likely to pick up in the quarters ahead.”
October’s Land Registry’s House Price Index, which has also been issued today (Friday 28 November), shows average house prices in England and Wales reached £177,377. The figure is up 7.7% year-on-year, and 0.1% month-on-month, but is lower than the peak of £181,269 in November 2011.
London prices rose 0.7%, bringing the annual rise to 18.6% and the average price of property in the capital is £460,060. Lambeth was the best-performing borough, with prices up 27.9% and Hackney had the highest monthly increase of 2.3%.
Exclusive Kensington and Chelsea, which is a leading target for overseas investors, saw the lowest annual growth of 9.5% and the greatest monthly fall of 2.5%, says the Land Registry data.
Wales saw the lowest annual price growth at 2% and prices there fell 0.9 month-on-month. The North East saw the largest monthly decrease with a fall of 2.7% to bringing annual rate of plus 2.7%.
The East experienced the greatest monthly price rise and was up 1.6% to an annual increase of 11%.
By Adrian Bishop, Editor, OPP Connect