As headlines go, last week’s Nationwide house price report showing prices down at their fastest annual rate since 2009 takes some beating even if a decline was more or less expected by experts.

The building society’s August survey showed the average house price was 0.8% lower than the previous month and 5.3% lower than August 2022 at £259,153, marking an annual fall of around £14,600 on the price of a typical home.

‘August saw a further softening in the annual rate of house price growth to -5.3%, from -3.8% in July, the weakest rate since July 2009,’ observed Robert Gardner, Nationwide’s chief economist.

‘The softening is not surprising, given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels.

‘Mortgage approvals have been around 20% below the 2019 average in recent months and mortgage application data suggests the weakness has been maintained more recently,’ added Gardner.

Not only are prices down, but transaction volumes have also fallen through the floor according to Nationwide with the sole exception of cash purchases.

Home-mover completions with a mortgage in the first half of 2023 were 33% lower than 2019 levels, while first-time buyer numbers were down around 25% and buy-to-let purchases involving a mortgage were nearly 30% below pre-pandemic levels.

The UK’s largest mortgage lender Halifax, which is owned by Lloyds (LLOY), was scheduled to have released its latest house price survey as this edition of Shares was published (7 Sep) and is likely to have reinforced the gloom around the housing market.

Yet despite a sluggish market and weak demand from first-time buyers, especially since the removal of the government’s Help To Buy scheme, sector analysts argue the quoted housebuilders are worth a look.

While they are forecasting a 30% decline in new-build activity this year, the team at Berenberg see a more stable market next year and argue the sector is attractively valued.

Although they don’t expect earnings to bottom out yet, they believe ‘the trough is visible and is now appropriately reflected in consensus forecasts’.

Among their stock picks, Berkeley (BKG) is ‘best in class across the sector and offers compelling over-the-cycle value creation’, while they say Crest Nicholson (CRST) offers the cheapest outright valuation.

Meanwhile, Liberum sees over 20% total shareholder return upside in the sector, ‘as valuations look very attractive’, although its optimism relies on mortgage rates continuing to decline which isn’t a given.

MJ Gleeson (GLE) is flagged by Liberum which believes its upcoming results (14 September) will show strong resilience, implying ‘growth should be amongst the quickest in the recovery’.

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