According to the Nationwide House Price Index, around £14,500 was shaved off the average property value, now £257,808, over the last 12 months with all regions recording annual house price falls in quarter three.

The South West was the weakest performing region where house prices fell by 6.3% in the year to September.

Out of the UK’s countries, Welsh homeowners experienced the biggest fall in annual prices at 5.4% with Northern Irish values falling the least at 1.8%.

A continuing trend is that more buyers are looking at smaller, less expensive properties such as flats and apartments. Flats, says Nationwide, have increased in value at a much slower pace since the start of the pandemic. Flats have risen by around 12% since Q1 2020 compared to semi-detached properties which rose by 21% and detached homes which increased by 24%.

The September fall in annual prices follows last week’s news that mortgage approvals for purchases had fallen to their lowest level of six months while remortgages dropped to their lowest point since 2012.

‘Housing market remains weak’

Robert Gardner, Nationwide’s chief economist, said: “Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, around 30% below the monthly average prevailing in 2019 before the pandemic struck. This relatively subdued picture is not surprising given the more challenging picture for housing affordability.

“For example, someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take home pay on their monthly mortgage payment – well above the long-run average of 29%.”

Gardner added that following the Bank of England’s decision to hold the base rate at 5.25% in September, investors have marked down their expectations for its future path in recent months amid signs that underlying inflation pressures in the UK economy are finally easing, and with labour market conditions softening. Inflation is currently 6.7 %.

He added: “This in turn has put downward pressure on longer-term interest rates which underpin fixed rate mortgage pricing. If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home.”

‘House prices will continue to fall’

Research group Capital Economics says that although house prices stabilised between August and September, it predicts that the pause in monthly falls is unlikely to mark the market’s trough.

“Leading indicators of house prices remain downbeat, so we suspect house price falls will resume in the coming months.

“Unchanged house prices in September bettered the consensus expectation of a third consecutive monthly decline of 0.4% month-on-month. While [Nationwide’s index] hints that prices are proving more resilient than we anticipated, it is not unusual for house price falls to be uneven from month to month.”

Tomer Aboody, director of property lender MT Finance, added: “As mortgage rates fluctuate on a daily basis, buyers and sellers are uncertain as to where the market is, which makes for instability and lower transaction volumes.

“With the Bank of England holding rates in September, confidence may start creeping back in, especially if there is another hold in rates at the next meeting. Mortgages are slightly cheaper, which will hopefully encourage buyers and sellers to act in the final quarter.”