Compared to the turmoil in the UK financial market last week, the UK housing market in September was remarkably calm. With Chancellor Kwarteng’s “fiscal event” only hitting in the last week of the month, it remains to be seen what October’s round up will bring…
A market in transition but overall growth still robust.
Fundamentally, house prices are still up year-on-year. Hometrack report year-on-year house price growth at 8.2% whilst Nationwide show a growth of 9.5%. Both agree that this is slower than the previous month.
Regardless of what happens in the following weeks, it paints a picture of a market in transition with Nationwide stating that this is the first month not to record a sequential rise since July 2021.
But any slowdown is merely a slowdown in growth rate, not actual appreciation. The fact remains that house prices are still up year-on-year and continuing to grow. A property bought just 12 months ago would have gained as much as 11.1% in Nottingham, or 9.2% in Manchester.
Rising mortgage rates means cash is king
Mortgage rates are rising quickly, and recent market volatility saw 40% of mortgage products pulled entirely. Average mortgage rates are now likely to be more than double what they were at the start of the year.
Recent cuts to the rate of Stamp Duty have softened this blow a fraction, but for many, affordability is still a challenge. It’s likely that this will mean the already large rental market will continue to flourish.
Robert Gardner, Nationwide’s Chief Economists comments, “Housing affordability is becoming more stretched. Deposit requirements remain a major barrier, with a 10% deposit on a typical first-time buyer property equivalent to almost 60% of annual gross earnings – an all-time high.”
Investors can still profit from UK property
Overall, house prices are still growing, with some regions out-performing the national average significantly
- National average – 8.2%
- East Midlands – 10.0%
- North West – 9.6%
- West Midlands – 9.3%
Housing is still in short supply, which means in the long term, investors will still see capital growth.
Hometrack’s report states that the likelihood of zero house price growth is low – “Right now, we don’t see any big variations in price adjustments by region or property type….[asking price decreases] are not precursors for big price falls but indicate the rate of price growth will slow more rapidly in Q4 and into 2023.”
If you’d like to talk to us about how to invest in UK property, our team of experts is on hand to offer personalized advice. Get in touch today.
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