House price growth slowed to 0.1% in September according to Nationwide, down from last month’s rise of 2.1%. This puts annual UK house price growth at 10.0%. Wales was the fastest growing country again this quarter, with annual price growth of 15.3%. The majority of English regions recorded slowing growth, including London, which also saw the lowest regional price growth at 4.2% in the year to Q3. So price growth is slowing but remains strong and for the first time since the Global Financial Crisis (GFC) no local authority saw house price falls during the year to June.

Activity in the housing market also remains strong and sales agreed were still 23% above the 2017-19 average in September. Over 1 million home sales had been recorded in 2021 by the end of August, a milestone we usually don’t reach until October. And we expect there to be more transactions in 2021 than in any year since the GFC.

But the housing market will not be immune to the wider economic conditions. What will happen to mortgage interest rates is key and it is hard to predict when the first rise may be or what would be the cause. Supply problems, such as the recent petrol crisis, may delay the recovery in GDP and so the Bank of England may hold its base rate lower for longer. But if the current high levels of inflation prove persistent, then the Bank has said that the base rate will be raised. This would have a knock-on effect on the affordability of mortgage payments.

The average UK rent increased 2.1% in the year to August, according to Zoopla. Rents have increased most in the South West (7.7%) and East Midlands (6.7%), and coastal locations were strongest with Folkestone and Cornwall up 15.5% and 12.4% respectively.

The rental market across major cities is also bouncing back, driven by the return of students, graduates and corporate re-locations. Over the last year, rents were up most in Sheffield (7.6%) and Bristol (6.9%). The fastest monthly growth was in London, at 1.6% in August. It remains the only major city with lower rents than a year ago, down -5.9%, but the supply/demand mismatch was at its highest level for over a decade in August, according to the RICS survey. Across the country there is a lack of supply of homes to rent, 60% lower than this time last year, according to TwentyCI. So rents are therefore likely continue to increase over coming months.