UK house price growth slows in October
Average house prices in the UK rose to £265,738 in October, a 2.4% increase from the previous year, a slowdown compared to the month before as the property market is set to be hit by the stamp duty changes introduced in the budget.
The figures from lender Nationwide showed that price growth has slowed, with the price of a typical UK home edging up by a marginal 0.1% in October from September.
Robert Gardner, Nationwide’s chief economist, said: “The price of a typical UK home increased by 2.4% year on year in October, though this represented a modest slowdown from the 3.2% pace recorded the previous month. House prices rose by 0.1% month on month in October, after taking account of seasonal effects.
“Housing market activity has remained relatively resilient in recent months, with the number of mortgage approvals approaching the levels seen pre-pandemic, despite the significantly higher interest rate environment.
“Solid labour market conditions, with low levels of unemployment and strong income gains, even after taking account of inflation, have helped underpin a steady rise in activity and house prices since the start of the year. “
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Nationwide also addressed the stamp duty changes announced in the budget this week, with Gardner expecting the main impact to be on timing.
“The main impact of the stamp duty changes is likely to be on the timing of property transactions, as purchasers aim to ensure their house purchases complete before the tax change takes effect. This will lead to a jump in transactions in the first three months of 2025 (especially March), and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes.”
Chancellor Rachel Reeves announced that the temporary increase in nil rate stamp duty thresholds in England and Northern Ireland will revert to previous levels on 31 March 2025. For first-time buyers, the threshold for properties priced under £500,000 will drop from £425,000 to £300,000, while for other residential buyers, it will decrease from £250,000 to £125,000.
Data from June 2024 indicates that the stamp duty change will impact approximately one in five first-time buyers, with effects varying significantly across the UK due to regional house price disparities.
In the South East, where 40% of first-time buyers purchased homes between £300,000 and £425,000, the impending change is expected to raise moving costs by an average of £2,900. Conversely, regions like Yorkshire and the Humber and the North of England will see less impact, with less than 10% of first-time buyers in those areas affected by the new thresholds.
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In addition to these changes, the chancellor announced a two percentage point increase in the higher rate of stamp duty for additional dwellings, effective 31 October. This adjustment is projected to affect around 194,000 transactions — approximately one in five residential deals in England and Northern Ireland — adding about £4,000 to the stamp duty costs for typical buy-to-let purchases and potentially dampening demand in that sector of the housing market.
Gardner also said that affordability remained an issue due to high interest rates, which would continue to temper overall market activity.
Karen Noye, mortgage expert at Quilter, said: “There will be another interest rate decision announced next week, which will potentially play a part in helping mortgage rates lower further. However, just the stability in mortgage rates that buyers have enjoyed over the last few weeks has helped renew confidence and get buyers back out into the market.
“The market reaction to Reeves’ spending plans will determine whether rates will fall as fast as previously thought as this could cause there to be more uncertainty about the speed of rate cuts with some of the measures potentially inflationary.”
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