SUMMARY

House prices rose 0.8% in October, according to Nationwide. This takes annual UK growth up to 5.8%, its highest level since January 2015. The net balance of surveyors reporting price growth was higher in October than any month since September 1999, with a large majority reporting house price growth, according to the RICS survey. 

New sales agreed subject to contract (SSTCs) are still far above their usual levels, 50% higher than the same period in 2019 during the four weeks to 1st November, according to data from TwentyCi. This is starting to translate into completed transactions, which in September were above both 2018 and 2019 levels. September also saw the highest the number of mortgage approvals since September 2007.

But the surge in activity is now past its peak, with fewer surveyors reporting increased new enquiries and new instructions every month since the peak in July 2020. Numbers of sales agreed each week have also been slowly falling. Completed transaction numbers will continue to rise over the next few months as the high volume of sales agreed since the spring lockdown move through the system.

Lockdown 2.0 has further delayed the wider economic recovery, with Oxford Economics now expecting a near 3% drop in GDP in Q4 2020. We expect the economic impact of this renewed lockdown will result in house price growth slowing and fewer new sales being agreed, particularly at the lower end of the market (read more here). The October RICS survey reflects this with only a small majority expecting price growth in next three months.

More positively, the improved prospect of a vaccine gives greater confidence in a sustained economic recovery from the middle of 2021. We expect that to translate into a more stable period of activity in the housing market. 

Rents in some of the larger cities have fallen over the year to September (see Figure 2). In London rents fell by 5.2%. Average rental growth across the UK excluding London was 1.7% over the same period. Across the UK, most surveyors reported increasing tenant demand and falling landlord instructions during the three months to October. But in London, surveyors reported the opposite, falling demand and increasing supply. This suggests that rental growth will continue in most places, but rents in London may still have further to fall.