SUMMARY

House prices rose by 0.9% in September, according to Nationwide. This takes annual growth up to 5.0%, its strongest level since September 2016. We see fairly even growth across the country with most regions sitting at between 2%-3% growth over Q3. The North East saw the strongest growth over the quarter at 3.1%, followed by the commuter belt around London at 3.0%. London itself sat at 1.5% quartely growth. This followed a much weaker Q2 for most regions. Scotland was the only region to see price falls during Q3, down -1.0%.

Strong price growth has been driven by high levels of competition and market activity. New sales subject to contract (SSTCs) at the end of September were at 175% of last year’s level. They have fallen marginally through September, down from the 183% of last year’s level at the beginning of the month. While SSTCs remain high, it is taking time for them to filter into completed transactions.

The latest RICS survey suggest new activity levels may have hit a high peak. September saw 76% of surveyors report rising levels of new buyer enquiries, and 69% reported rising levels of new instructions. While still very positive, this is the second month these indicators have slipped down from their record high in July.

Evidence of strong activity also comes from the mortgage market, which saw a 12 year high for the number of mortgage approvals in August. Rising rates and more stringent loan to value requirements may restrict the market going forward however, especially for those with lower deposits, such as first time buyers (FTB). As a result, we would expect FTB numbers to fall away, and home movers with equity to take a larger proportion of the market.

Armed with more up to date house price data, we have revised our forecasts. We now expect positive value growth across all regions this year, but no growth in 2021. While 2020 has been stronger than previously anticipated, rising unemployment as government support reduces, the end of the stamp duty holiday, underwhelming August GDP figures, and the impending end of the Brexit transition period will likely subdue the market next year. You can read the full forecast document here. 

The average UK rent was up 1.5% in the year to August, according to the ONS. Growth was highest in the South West, up 2.5% annually, and lowest in Scotland, at just 0.5%.