Affordability improves as house prices continue their slow, sleepy decline

With house prices continuing to climb more slowly than inflation or wages, the latest Halifax house price index is a further encouraging sign that the overheated market is returning to sanity.

Estate agents placards © DANIEL LEAL-OLIVAS/AFP via Getty Images

(Image credit: Estate agents placards © DANIEL LEAL-OLIVAS/AFP via Getty Images)

The latest Halifax house price index shows the country's properties just 0.9% more expensive than they were this time last year. The average UK home will now cost you £232,249.

"This is the lowest growth seen in 2019", says Russell Galley, managing director at Halifax. "It again extends the largely flat trend which has taken hold over recent months."

The market remains robust, however HMRC monthly data showed home sales are at their highest level since August 2017. Some 101,740 homes were sold in September, a 5% increase from August. Mortgage approvals are also on the up, the Bank of England reports, with 65,919 mortgages approved in September. The 0.4% increase is beginning to reverse the 2.1% decline we saw in August.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

House prices' sluggish growth over the last year may have something to do with the uncertainty surrounding Brexit. Milton Rodosthenous, director of online auction service at LetsBid Property, pointed out that despite the political situation the market has "remained stable and resilient in the face of an unprecedented political situation and a period of uncertainty that has stretched to over three years now."

Could house prices resume their rise?

With a general election on the horizon, 2020 could be a prosperous year for the housing market. "Once the Brexit outcome is more settled", said Mike Scott, Yopa's chief property analyst, "it may then give a short-term boost to house prices... the stock of houses for sale is quite low, and demand can react more quickly than supply once the uncertainty is lifted."

On the other hand, a general election brings a lot of uncertainty with it. Coupled with an ever-changing Brexit deadline, it's hard to say when consumer confidence will be entirely restored. With that said, we remain convinced that slowly falling prices are a good thing. Employment remains high and the economy is fine, so the prospect of affordability is there, even if it is a bit faint in the south and east of the country.

Prime London property continues to fade, however. House prices in the City of London and Westminster dropped by 10.8%, anda home in the centre of the city would still cost you £1.11m. But further away from central London, prices have increased, with house prices in Brent North jumping 19.5% to £460,000 in the last two years.

Overall, however, the housing market remains stable, if a bit sleepy. And, as Scott points out, with a no-deal Brexit looking unlikely and economic fundamentals still going strong, a house-price crash doesn't seem to be on the cards, so we can all breathe a little easier. For now, at least.

Nicole García Mérida

Nic studied for a BA in journalism at Cardiff University, and has an MA in magazine journalism from City University. She joined MoneyWeek in 2019.