Annual house price growth slows in October

The rate at which house prices are rising has fallen to its lowest level for over three years, according to the latest Halifax house price index.

The new figures show that annual house price inflation has fallen to 5.2% in October, its lowest rate since July 2013, and almost half of the peak of 10% seen in March this year and down from 5.8% in September. On a monthly basis, house prices went up by 1.4%, compared to just 0.3% in September but monthly figures are seen as very volatile. The quarterly comparison is a more reliable indicator of the underlying trend.

The data reinforces Nationwide’s own survey, out last week, which showed the annual rate of house price increase slowed to 4.6% and that on a monthly basis house prices were unchanged in October after 15 consecutive months of growth. However, Halifax said that prices remain “robust” and that the main influence on the slowdown in the rate of growth was affordability pressures. The average property now costs £217,411.

Halifax's chief housing economist, Martin Ellis, said: “Activity levels, like house price growth, have softened compared with a year ago. Home sales, however, appear to have stabilised in recent months following the distortions earlier in the year due to the changes to stamp duty in April.

Actual homes sales in the third quarter of 2016 were 8% lower than in the same period last year.

Ellis continued: "Annual house price growth has nearly halved from a peak of 10.0% in March this year, but remains robust at 5.2%. This expected slowdown appears to have been largely due to mounting affordability pressures, which have increasingly constrained housing demand.

"Whilst house price growth may ease further in the coming months, very low mortgage rates and a shortage of properties available for sale should help support price levels."

On a quarterly basis house prices between August and October went up by 0.1% compared to the three months before, May June and July. Halifax said mortgage approvals have also steadied. The number of mortgage approvals for house purchases increased in September, the first monthly rise for four years. However, the lender warned that the supply of new homes remains very low, largely flat in the last quarter at one of the lowest levels ever recorded.

Dr Howard Archer, chief UK & European economist at IHS Global Insight said: “With housing market activity seemingly coming modestly off its recent lows and the economy currently resilient, house prices may well rise modestly in the near term.

“However, we suspect that house prices will come under increasing pressure as 2017 progresses and may dip modestly over the year, possibly by around 3%.”