Residential property prices rose by an average of 0.9% month-on-month in October, thanks in part to a constrained supply of properties for buyers to choose from, according to Nationwide Building Society.

Across the UK, home values dropped by 3.3% compared with October last year, the mortgage lender said.

The average UK house price in October was £259,423.

Industry reactions:

Iain McKenzie, CEO of The Guild of Property Professionals, said: “This time last year, the Chancellor was still doing damage control over the disastrous effects of the so-called ‘Mini Budget’. Homeowners and prospective buyers alike have both felt its impact over the past year.

“Today’s figures show there is some light at the end of the tunnel for sellers, with a modest increase in prices after months of sluggish growth.

“The average home still costs almost £9,000 less than it did this time last year according to Nationwide, but this readjustment in prices had been on the horizon for some time, as property values showed unprecedented growth throughout 2021 and 2022.

“Homeowners should feel reassured that their home is still worth significantly more than it did prior to the pandemic, and we are starting to see steady growth return once again.”

 

Nathan Emerson, CEO of Propertymark, commented: “As expected, the Nationwide House Price Index shows us an overall dip in house prices year on year of over 3 per cent. The picture is a little more positive when comparing last month’s figures with this month, however this is a trend we will need to watch closely before feeling more confident. There remains a high level of market uncertainty, not helped by high inflation which has translated into five interest rate hikes for homeowners and buyers to deal with this year alone.

“Propertymark’s own Housing Insight Report shows there has been a slight reduction in the number of available properties for sale at each member branch in September 2023, this fused with issues regarding the cost-of-living crisis continues to affect the housing market overall. Sales in some property segments remain extremely fragile, nonetheless rising incomes should help increase housing affordability across the next twelve months.

“It does however remain encouraging to witness many buyers still having the confidence to enter the market currently. Propertymark is hopeful to see a firm drop in inflation and for this to potentially translate into reduced interest rates.”

 

Sam Mitchell, CEO of Purplebricks, stated: “We have seen an unexpected boost in October following a quiet September. After the Bank of England held its nerve on interest rates, there was an uptick in property demand for the last week in September and through October.

“Banks are getting increasingly competitive in the rates being offered to consumers. This has meant an increase in activity which, while perhaps too late to affect this year’s data dramatically, bodes well for a good start to 2024.

“Yet, as we gear up to the General Election, any political noise about potential stamp duty cuts has the potential to destabilise the market. If people think there is a chance that rates might be cut then this could wrongly and unnecessarily delay their purchasing decisions.”

 

Simon Gerrard, MD of Martyn Gerrard Estate Agents, said: “House price growth returning to positive figures is a hugely promising sign for the property market. Whilst prices are still below where they were a year ago, The Bank of England’s recent decision to freeze the interest rate has clearly restored a good amount of buyer confidence, and with strong wage growth and inflation coming under control, there is a positive outlook for both the housing market and the wider economy.

“Nonetheless, whilst activity is clearly picking up again, the key factor in returning to strong long-term growth will be the Bank of England lowering the base interest rate, as there will be a lot of people who paused their property search after the interest rate freeze, and who are now waiting to see what the Bank of England does next. If we begin to see downward pressure on the base rate, this could well fire the starting pistol on a flurry of house buying activity towards the end of year, provided lenders respond in the right way and reduce mortgage rates.

“We’ll have to wait and see what the Bank of England announces this week, but the view from the ground is that interest in buying a home remains high, and so even a small reduction to the base rate of a quarter of a percent would likely be enough to restore a lot of confidence to buyers and unleash this pent-up demand. As a result, house prices will likely return to growth quite quickly, as after all, we are still facing a property market with demand that vastly outstrips supply.

 

Jason Tebb, CEO of OnTheMarket, commented: “With an uptick in prices in October, the housing market continues to show remarkable resilience.

As the Bank of England meets this week, borrowers will be hoping for no further hikes in base rate as affordability is already stretched for those relying on mortgages to fund their purchases. A second consecutive hold in rates would go a long way to boosting confidence.

Vendors who are serious about finding a buyer this side of Christmas will need to be realistic on their expectations – property seekers at this time of year are highly motivated, but sensitive on price and won’t pay over the odds.”

 

Jonathan Hopper, CEO of Garrington Property Finders, remarked: “Springtime this is not, but there are tentative signs of thawing in the property market.

“Official data shows the number of homes sold in September was down 17% on the same time last year, and buyers remain deeply price sensitive, but Nationwide’s data suggests 2023’s price correction may finally be easing.

“With the Bank of England expected to hold interest rates steady again tomorrow and average mortgage rates creeping down, the combination of better value homes – and the borrowing needed to buy them – could give the market a welcome lift as the nights draw in.

“While thus far it has been cash buyers who’ve capitalised most on falling house prices, greater clarity on interest rates should bring more mortgage-reliant buyers back into play.

“There’s an increasing realisation that while a mortgage rate isn’t for life, the purchase price you pay is for the lifetime that you own a property. With prices down across all regions, more buyers are starting to look beyond mortgage rates at the money they can save on the price.

“Price cutting remains widespread, especially for new-build homes in areas with abundant supply. But pragmatic sellers who adapt to the recalibrated market with more realistic asking prices could be the first to benefit from stabilising buyer demand.

“With average wage rises now outstripping inflation, improving affordability should bring more would-be buyers out of the woodwork – even if every offer made will continue to factor in the risk that prices haven’t yet bottomed out.”

 

Anthony Codling, chief executive of Twindig, said: House prices unexpectedly increased in October, although this is likely to reflect a paucity of supply rather than an increase in demand. Supply constraints play into the hands of housebuilders who have homes to sell, and prices going up not down in the wider market will take a bit of pressure off non-price incentive levels. We expect housing market conditions to remain subdued for the rest of the year, but today’s news on house prices suggests that it’s not all doom and gloom.

 

Guy Gittins, CEO of Foxtons, commented: “There continues to be opportunities for buyers in the current market as reduced demand and lower available stock have created an environment where house prices are not growing at rates seen over recent years in London.

“The cost of borrowing remains comparatively high when viewed against historic low levels but buyers and investors can still find good finance deals when working with a professional broker. This will be especially important for first-time buyers or those with smaller deposits.

“All eyes will be on the Bank of England this week and the latest decision with regard to the base rate. A decision to hold, or even reduce, interest rates is unlikely to generate a dramatic uplift in market activity, especially with Christmas fast approaching, but it will add confidence to the market ahead of January.”

 

Verona Frankish, CEO of Yopa, noted: “An increase in the monthly rate of house price growth, however incremental, demonstrates that the nation’s homebuyers still have an appetite to transact, even in tough market conditions.

“Of course, higher borrowing costs continue to dampen the market to an extent, with fewer buyers taking the plunge and property values remaining off the record pace set last year.

“However, it appears as though the recent decision to freeze interest rates has helped boost market confidence and with the potential of a reduction on the cards this week, we could see a stronger finish to the year than many would have previously anticipated.”

 

Nicky Stevenson, MD at Fine & Country, commented: “House prices showed signs of recovery in October, finally gaining back some momentum after the summer lull and boosted by a pause in interest rates.

“The Bank of England’s surprising decision to hold off on a rate hike in September was a relief for hesitant buyers, who were waiting for economic stability before committing to a purchase.

“All eyes will be on tomorrow’s announcement to see if the pause was a fleeting respite. If interest rates continue to hold steady at 5.25%, it would instil much-needed confidence and encourage market stability.

“The decision also sparked competition among mortgage lenders, who have been cutting their repayment rates in response. For first-time buyers with limited deposits and cash reserves, this has been a welcome move and could encourage more to step onto the property ladder.

“If we see another pause in rate rises tomorrow, it should provide an extra boost to autumn sales, as sellers recognise this as a prime listing opportunity.”

 

Tom Bill, head of UK residential research at Knight Frank, said: “Sentiment in the UK housing market is weak but unlike the early months of Covid or the period following the mini Budget, there is no single cause. There is financial pain from higher mortgage rates, hesitancy as the Bank of England struggles to contain inflation, and uncertainty as a general election looms and conflict persists in the Middle East. It means the seasonal bounce in activity didn’t happen this autumn, although price falls have been kept in check by weak supply. We expect UK prices to fall by 7% this year and 4% next year as inflation comes under control and mortgage rates stabilise.”

 

Matt Thompson, head of sales at Chestertons, added: “The recent price adjustment that some of the property market has seen, led to more house hunters continuing their search in October with sellers receiving an increasing number of offers that month. The vast majority of buyers have accepted that interest rates are here to stay and, after readjusting their budget or search criteria, are no longer willing to delay their property search any further.”

 

House prices increase in October, but remain lower than a year ago