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House price growth rises to 4.5% but confidence dips

Cherry Reynard
Written By:
Cherry Reynard

The average property price in England has risen 4.5% year-on-year to £225,826, however confidence in the housing market has fallen to its lowest level in five years.

According to the latest Halifax House Price Index, the 4.5% year-on-year growth recorded in October was the highest rate since February. The updated average price of £225,826 represents a 2.8% jump from the January figure of £219,741, and the highest average on record.

In the three months from August to October, house prices were 2.3% higher than the May to July period – the fastest price growth on this measure since January.

On a month-to-month measure, prices rose by 0.3% between September and October, following a 0.8% jump in September.

However, despite recent increases in house prices, confidence in the housing market has fallen to its lowest level since December 2012, according to the Halifax Housing Market Confidence Tracker.

The survey, which tracks consumer sentiment on whether house values will increase or decrease in a year’s time, showed that one in five respondents thought prices would fall – the highest level since October 2012.

The Halifax index is also released as mortgage approvals – an important indicator of completed house sales – fell in September for the second consecutive month to 66,232 loans.

Strong growth from weak supply

Both new sales instructions and buyer enquiries fell in September. The quantity of new sales instructions for homes fell for the 19th consecutive month, while new buyer enquiries declined in September for the sixth month in succession.

Jonathan Samuels, chief executive of the property lender, Octane Capital, said: “For a number of months now the property market has exuded strength, but in reality its main driver is weak supply. Price rises are being driven by the shortage of property available for sale, and broader supply problems, rather than a confident consumer and strong economy.”

Nevertheless, although the amount of home sales fell by 2% to 100,850 in September, monthly sales have stayed above 100,000 since January, with the three months to September being 6% higher than the same period last year.

Commenting on the index, Russell Galley, managing director of Halifax Community Bank, said: “The fact that the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate, continues to support house prices and is likely to do so over the coming months.”

However, Galley also noted that “increasing pressure on household finances and continuing affordability concerns are some of the factors likely to dampen buyer demand.”

The Autumn Budget

All eyes are now on the upcoming Autumn Budget, which may see the introduction of new housing policies.

Jeff Knight, director of marketing at Foundation Home Loans, commented: “With just three weeks until the chancellor’s first Autumn Budget, the arrival of rumoured new housing policies are eagerly awaited.

“In the run-up, we have seen moves to curb second home-ownership and the impact of Stamp Duty on housing market activity debated, with potential cuts rendering significant savings for first-time buyers.” He added: “However, Stamp Duty is only one hurdle facing those struggling to enter the market as mortgage affordability, rising prices and inflation outstripping wages continue to delay home ownership plans.”