UK property prices finally losing momentum?

Price growth cooled slightly last month, with signs that the market may be running out of steam. However, prices rose for the thirteenth month in a row according to August's numbers from Nationwide.

House prices rose 0.8% last month, but Nationwide points to signs that the market is starting to cool. The annual increase slowed from 11% last month to 10% in August, lifting the average house price to a level almost £50,000 higher than two years ago.

Nationwide's figures for August

.

August 22

July 22

Monthly change

+0.8%

+0.2%

Annual change

+10.0%

+11.0%

Average price

Not seasonally adjusted

£273,751

£271,209

Robert Gardner, chief economist, Nationwide

"There are signs that the housing market is losing some momentum, with surveyors reporting fewer new buyer enquiries in recent months and the number of mortgage approvals for house purchases falling below pre-pandemic levels. However, the slowdown to date has been modest, and combined with a shortage of stock on the market, has meant that prices growth has remained firm.

"We expect the market to slow further as pressures on household budgets intensifies in the coming quarters, with inflation set to remain in double figures into next year. Moreover, the Bank of England is widely expected to continue raising interest rates which will also exert a cooling effect on the market if this feeds through to mortgage rates, which have already increased noticeably in recent months."

Rightmove's index says prices fell 1.5%

None of the various indexes provide a perfect picture of the market - they vary according to the source data that they use. The gold standard is the one produced by the Office of National Statistics which uses a representative sample of actual transactions covering a variety of property types and locations. However, it arrives later than the privately produced ones, so is less widely reported in the mainstream press.

The Nationwide index has two weaknesses. It is based upon mortgage transactions during the month, thereby reflecting buying decisions made some time earlier, and does not take account of cash purchases which make up a significant proportion of the market. It does, however correlate closely to the ONS figures.

A number of newspapers made much of the 1.5% fall in the Rightmove index for August. This index differs fundamentally from the other two as it is not based on actual transactions. Its source data is drawn from the asking prices of newly advertised properties on their portal.

The 1.5% drop in asking prices they reported for August is something we see almost every summer. With the exception of the two pandemic years, this fall is entirely consistent with the ten year average.