Apartments are underperforming when it comes to capital growth, according to the Nationwide.

The lender, in its latest house price index, says there are signs that more buyers are looking towards smaller, less expensive properties, with transaction volumes for flats holding up better than other property types.

However, this may be because of relatively poor capital growth.

“Affordability for flats has held up relatively better as they experienced less of a price increase over the pandemic period. Average prices for flats have increased by 12 per cent since the start of the pandemic – half the 24 per cent increase recorded for detached properties” explains Robert Gardner, Nationwide chief economic.

“Despite signs of demand for flats holding up a little better more recently, the price underperformance has continued in the most recent quarterly data, with flats seeing the largest year-on-year fall (down 5.7 per cent), compared to a fall of 3.6 per cent for detached, 4.6 per cent for semi-detached and 5.3 per cent for terraced properties.”

Across the market more generally, activity plummeted 30 per cent in August – and Gardner puts this down firmly to high interest rates. There were just 45,500 mortgages approved in August, nearly a third down on 2019.

The mainstream house price index shows no change in September, remaining down 5.3 per cent year on year. All regions recorded annual house price falls in Q3, with the South West the worst, down 6.3 per cent.

Gardner concludes: “Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, c.30 per cent below the monthly average prevailing in 2019 before the pandemic struck.

“This relatively subdued picture is not surprising given the more challenging picture for housing affordability. For example, someone earning an average income and purchasing the typical first-time buyer home with a 20 per cent deposit would spend 38 per cent of their take home pay on their monthly mortgage payment – well above the long-run average of 29 per cent.”