UK property prices - have they peaked?

Like all holidays, the stamp duty relief has come to an end so it is no surprise that Nationwide reported a levelling off in house prices in September. Capital Economics and Hamptons shared their views on what we can expect next

UK house price growth slowed to just 0.1% in September according to Nationwide Building Society, a sharp slowdown on the 2% seen in August.

Nationwide's numbers for September

• Annual house price growth eased back to 10.0%, from 11.0% in August.
• Prices little changed month-on-month, after taking account of seasonal factors
• Wales and Northern Ireland the strongest performing regions in Q3, London the weakest

	September 2021	August 2021
Monthly change	+0.1%	+2.0%
Annual change	+10%	+11%
Average price ​Not seasonally adjusted	£248,742	£248,857

Annual house price growth remained in double digits for the fifth month in a row in September, though there was a modest slowdown to 10.0%, from 11.0% in August. House prices rose by 0.1% month-on-month, after taking account of seasonal effects. As a result, house prices remain c13% higher than before the pandemic began in early 2020.

House prices have continued to rise more quickly than earnings in recent quarters, which means affordability is becoming more stretched. Raising a deposit remains the main barrier for most prospective first-time buyers. A 20% deposit on a typical first-time buyer home is now around 113% of gross income – a record high.

Robert Gardner
​Chief Economist, Nationwide

Outlook

It is likely that the rate of price rises peaked during the summer months.

As we head towards year-end, the outlook remains clouded. Activity is likely to slow down with the end of stamp duty relief and the winding down of furlough, though people's reassessment of their housing needs is likely to put a floor under property prices for some time yet.

Looking further ahead, investors will be encouraged by recent forecasts suggesting that property prices will continue to climb, albeit at a more modest pace than the recent past.

Capital Economics have revised their expectations for 2022 from a 3% increase to 5%. Andrew Wishart, their housing economist said "​We are increasingly of the view that home working will increase the amount households put towards housing costs.

“And lenders appear to be prepared to accommodate households’ increased appetite for housing, judging by the recent jump in the average size of mortgages approved."

Hamptons, part of Countrywide, have slightly more modest expectations, forecasting price growth of 3.5% for 2022, with the Midlands and the North above the national average, ranging between 4% and 6%. Their projection exactly matches Savills' forecast from July.

	2022	2023	2024
Capital Economics	+5%	-	-
Hamptons	+3.5%	+3.0%	+2.5%
Savills	+3.5%	+3.0%	+2.5%