Market stalls as potential buyers sit tight until the economic outlook becomes clearer.

House price growth slowed to its lowest level for more than five years in October as Brexit uncertainty continued to take its toll on the market.

The annual rate at which property values are rising dropped to 1.6% during the month, a level last seen in May 2013, according to Nationwide Building Society. The average UK home now costs £214,534.

Robert Gardner, Nationwide’s chief economist, said: “We continue to expect house prices to rise by around 1% over the course of 2018.”

Why is this happening?

Nationwide blamed the slowdown in growth on the ongoing squeeze on household budgets, as well as economic uncertainty, which is causing people to postpone moving decisions.

But low borrowing costs, high employment levels and a shortage of homes for sale are continuing to support prices.

Even so, property transactions remain subdued, with 1.2 million homes changing hands in the 12 months to September, 30% below the level seen in the same period of 2007.

Who does it affect?

The group said the mix of buyers had changed significantly since the property market has recovered from the financial crisis.

On the one hand, there has been a significant increase in the proportion of cash buyers, who are not dependent on being able to get a mortgage, and first-time buyers, who have benefitted from a raft of government support, such as the Help to Buy scheme.

But there has been a sharp fall in purchases made by buy-to-let investors since 2015, when a series of tax changes were introduced, including higher stamp duty.

There has also been very little recovery in the number of home movers with a mortgage. This group has not benefitted as much as first-time buyers from government support, while strong house price growth has made it more difficult to trade up the property ladder. 

What’s the background?

The figures came as the NHBC, which provides warranties on new homes, reported that the number of properties completed in the third quarter had soared to an 11-year high.

A total of 43,578 new homes were registered in the three months to the end of September, 15% more than a year earlier and the highest level since the third quarter of 2007.

Within the total, 33,520 homes were in the private sector, with the balance in the affordable sector.

But the figure remains well below the Government’s target of having 300,000 new homes built across the UK every year.

Steve Wood, chief executive of the NHBC, said: “The upturn in registrations over recent months is good news for the industry and shows there remains strong demand for high quality new homes in many parts of the country.

“On a broader front, the industry remains cautious in the short-run until the economic impact of Brexit is clearer.”

The number of new properties being built increased in seven of the UK’s 12 regions. London saw the biggest year-on-year jump of 141%, although this was partly due to an unusually low figure during the third quarter of 2017. 

Top 3 takeaways

  • House price growth slowed to its lowest level for more than five years in October

  • The annual rate at which property values are rising dropped to 1.6% during the month

  • The average UK home now costs £214,534

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