Annual house price growth slows again in November
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, according to the Nationwide House Price Index.
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said: “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%.
Stronger economy should underpin activity
“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.
“Affordability does not appear overly stretched, at least at the UK level, with first time buyers continuing to represent an unusually high proportion of mortgage activity and with typical mortgage payments as a share of average income close to the long run average. Historically low mortgage rates have helped to mitigate against the fact that house prices have been outstripping income growth.
“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.”