House prices record biggest fall in five months

House prices in the UK dropped 1.4pc between August and September, marking the second consecutive monthly decline and the largest fall since April in a sign that the property market is continuing to cool down. 

The average price of a property was £225,995 in September, down from £229,284 in August, according to the latest data from mortgage lender Halifax.

Hansen Lu, of Capital Economics, said he expected the market to remain subdued as high prices relative to incomes prices out many buyers.

" There are few reasons to expect house price inflation to accelerate," he said. "We don’t expect those factors to change anytime soon.”

Compared to a year earlier, however, house prices climbed 2.5pc in September, although this rate of growth was slower than the 3.7pc year-on-year increase recorded in August.

The number of mortgage approvals increased slightly in August as well, according to figures from the Bank of England, to 66,440 from 65,156 in July, which is close to the average over the past five years.

Russell Galley, managing director at Halifax, said the property market, although cooling, was being supported by a lack of supply and availability of cheap debt.

"The annual rate of growth rate of 2.5pc in September is near the top of our forecast range of 0 to 3pc for 2018, as a low supply of new homes and existing properties for sale, combined with historically low mortgage rates and a high employment rate, continue to support house prices," he said.

The housing market has slowed since the EU referendum in 2016, and many economists last year predicted growth would flatline in 2018.

There are variations in the property market depending on what region you live in. In London house prices have fallen sharply over the past year, although they remain the most expensive in the country. Some of the city's most exclusive boroughs have suffered double-digit declines.

In June, prices in the City of London fell 23.8pc compared to the year before, while in Kensington and Chelsea they dropped 13.9pc and in Westminster they slid 12.1pc, according to data from the Office for National Statistics and the Land Registry.

Samuel Tombs, economist at Pantheon Macroeconomics, expects a combination of rising mortgage rates and increased economic uncertainty to weigh on demand over the next six months.

Halifax's house price index is based on homes bought with mortgages and excludes council house sales, shared ownership and help-to-buy schemes.

The index, established in January 1983, is the UK's longest running monthly house price series.