Home prices drop for first time in 17 months - Nationwide

There was further evidence that the UK housing market is cooling as Nationwide reported the first monthly decline in residential property prices since April 2013.

The data from Nationwide, the UK’s second largest mortgage lender, show that the average price of a residential property fell by 0.2 per cent in September, down from £189,306 the preceding month. As a consequence of the month-on-month drop, the annual rate of property price inflation decreased from 11 per cent in August to 9.4 per cent in September.

Despite the monthly dip, Nationwide’s figures, on a quarterly basis, reveal that all 13 regions in the UK witnessed price rises in the third quarter (Q3) of this year, with the national average increasing quarter-on-quarter by 1.5 per cent to £188,810 – a rise of 10.5 per cent compared to Q3 2013.

It was interesting to see that annual price growth in London, which kick-started the recent UK property boom, slowed from 25.8 per cent in Q2 2014 to 21 per cent in Q3 2014, with the average price of a home in the capital hitting £401,072.

The North of England saw the lowest annual price increase, with the average price of a property rising by 4.3 per cent year-on-year to £121,990.

Robert Gardner, Nationwide’s Chief Economist, commented, “While September saw a slowing in house price growth, the picture on a quarterly basis was still relatively strong. There remains significant regional variation however, with the South of England still seeing the strongest rates of growth.

“Price growth may soften further in the final quarter of the year, given the high base for comparison from Q4 2013. However, the outlook remains uncertain. There have been tentative signs from surveyors and estate agents that buyer demand may be starting to moderate, but the low level of interest rates and strong labour market suggest that underlying demand is likely to remain robust.”

Aside from other things, the price drop reported by Nationwide may help to alleviate fears that the property market is not in bubble territory and follows on from a string of other reports, including the latest Hometrack National Housing Survey, which also indicate that the UK house market is slowing.

The findings from the Hometrack survey of estate agents, also released last week, revealed that there was no change in the average UK house price in September following 18 months of consecutive increases, based on its own data.

Richard Donnell, Director of Research at Hometrack, said, “Buyer uncertainty is growing in the face of a possible interest rate rise, a General Election on the horizon and recent warnings of a house price bubble.”

Much like the Nationwide report, Hometrack noted a softening of property prices in London. In fact, the English capital was the only area to record a decline in property values in September, with further modest price declines anticipated in the run-up to Christmas.

Donnell added, “This loss of momentum in price growth comes at the end of a very strong run of 18 months.”