Average annual house price growth has slowed to 5.8%, the lowest yearly growth rate since August 2013, according to the latest Halifax House Price Index.
This compared to 6.9% in August and continues the downward trend seen over the past six months after the annual rate reached 10.0% in March.
Monthly house price growth edged up 0.1% in September following two consecutive monthly falls. The average annual house price was £214,024.
Martin Ellis, Halifax housing economist, said: “House prices in the three months to September were largely unchanged compared with the previous quarter. The annual rate of growth eased from 6.9% in August to 5.8%.
“The housing market has followed a steady downward trend over the past six months with clear evidence of both a softening in activity levels and an easing in house price inflation.
“A lengthy period where house prices have risen more rapidly than earnings has put pressure on affordability, therefore constraining demand. Very low mortgage rates and a shortage of properties available for sale should, however, help support price levels over the coming months.”
Rob Weaver, director of investments at property crowdfunding platform Property Partner, said: “The contrast couldn’t be starker. As house prices have shown stability post-Brexit, it’s been panic stations for the commercial sector, although that now appears to be settling down.
“The softening in market activity due to affordability issues has been counter-balanced with the severe shortage in housing supply, and it is this that has helped to support prices.
“While at a national level house prices are standing firm, evidence suggests that the prime central London market is continuing to slow down. Many would like to blame Brexit but really it’s stamp duty – essentially a tax on mobility – which has put many buyers off.
“However, further slides in the pound and indices reporting steady growth post-Brexit, should make the UK property sector an attractive destination for foreign investment. I expect though that overseas buyers will take a cautious approach rather than rush in.
“With record low interest rates and a continuing paucity of homes for sale, prices look likely to remain fairly solid until the end of the year. Recent surveys showing renewed consumer and business confidence after the EU referendum is also cause for optimism.”
Howard Archer, chief UK economist at IHS Global Insight, said: “The Halifax’s September data reinforce our belief that house prices will be essentially flat over the final months of 2016. While softer housing market activity is likely to limit house prices, we suspect that the current resilience of the economy and a shortage of properties will prevent prices from falling over the final months of 2016.”
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