ONS: house prices stalled in September

ONS shows UK house price growth did not change between August and September - but are prices falling?

If you’re looking to buy a house, then the good news is house prices look like they are slowing. Latest official stats showed house-price growth slowed down in the year to September, and did not change from August to September.

UK house price growth is beginning to slow. The latest data from the Office for National Statistics (ONS) shows UK house prices grew by 9.5% in the 12 months to September, down from 13.1% in August and 15.2% in July.

According to the ONS, the annual percentage growth slowed because UK house prices rose sharply in September 2021, coinciding with changes made to the Stamp Duty Land Tax when the government said no Stamp Duty was payable on properties up to the value of £250,000.

However, house prices remained the same between August and September 2022, adding to the slowdown in the annual percentage rate.

According to the ONS, the average property in the UK now costs £295,000 in September 2022 – £26,000 higher than this time last year, and unchanged since August 2022.

Average house prices increased over the year to £314,000 (9.6%) in England, to £224,000 in Wales (12.9%), to £192,000 in Scotland (7.3%) and to £176,000 in Northern Ireland (10.7%).

“It is becoming abundantly clear that more and more buyers simply can’t make the numbers work in the face of red-hot inflation, with the rising cost of necessities like food and household energy hindering deposit building effort,” says Myron Jobson, senior personal finance analyst at interactive investor.

How have house prices changed?

Annual house price rate of change for all dwellings, UK, January 2006 to September 2022

Several house price indexes show UK house price growth is slowing

The data from the ONS was published soon after Rightmove’s house price index, which recorded a 1.1% decrease in October for the average price of properties coming to the market. Earlier this month, the Halifax House Price Index also showed house prices falling, with a drop of 0.4%.

Rightmove also said demand appears to be slowing among new buyers as bleak economic conditions make it unclear whether now is a good time to buy a house. Buyer demand is up 4% on pre-pandemic levels, but is down 20% on October last year. 

Nationwide’s latest house price index corroborated the data – house price growth slowed to 7.2% in October from 9.5% in September. According to Nationwide, house prices fell 0.9% month-on-month, their first fall since July 2021. 

Why is UK house price growth slowing?

“It’s no surprise that the housing market is stalling considering the magnitude of difficulties facing people’s finances as we head into winter,” says Karen Noye, mortgage expert at broker Quilter. 

UK inflation hit a 41-year high of 11.1%, the ONS revealed this morning. The housing market “is not immune to these market forces,” says Noye. “As people start to struggle with their everyday bills, they will either think about moving to a smaller house, which is cheaper to live in, or opt to stay put and ride out this period of inflation and high interest rates. 

“This means stock builds up in the market while there is a dearth of demand. Ultimately, this will push house prices lower. Some lenders are predicting a 10% house price drop over the next few months and these statistics are likely just the start of this shift.”

On top of the rising cost of food and energy, people are struggling with rising mortgage rates following the mini-Budget in September, which triggered a rise in borrowing costs. Mortgage rates are currently at around 6%, the highest level they have been since 2008. With more interest rate rises on the cards, they are likely to remain high. 

“Buyers will hope the chaotic aftermath of the short-lived mini-Budget will not be repeated following the Autumn Budget,” says Jobson, referring to chancellor Jeremy Hunt’s fiscal statement which he is due to report tomorrow. “Many will be waiting with bated breath for any surprises or help in tomorrow’s fiscal event.”

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