Annual house price growth rises to 2.5% says Nationwide

The latest data and analysis from Nationwide has revealed that, during October, the annual rate of house price growth rose slightly to 2.5%, from a revised 2.3% in September.

Related topics:  Property
Warren Lewis
1st November 2017
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Robert Gardner, Nationwide's Chief Economist, had this to say: “Nevertheless, annual house price growth remains within the 2-4% range that has prevailing since March. Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appears to be weighing on confidence. The lack of homes on the market is providing support to house prices.

Industry reaction

Russell Quirk, founder and CEO of eMoov.co.uk, commented: “Despite a number of significant, testing events the UK property market and the economy as a whole have shown an air of defiance and both outperformed wider negative predictions.
 
With a slow but consistent recovery from such detrimental proceedings as the EU referendum and the shambolic snap election, it is unlikely that any marginal increase in interest rates that may come this week will stifle this growth.
 
Not only will any rates rise seen this week be financially palatable for UK homeowners, a swelling population both native and from abroad, coupled with a severe lack of building stock being built, will see prices remain inflated to do the imbalance between supply and demand.”

Graham Davidson, managing director of buy to let specialist, Sequre Property Investment, comments: “We’re beginning to see steady growth, reflected in this report with a 2.5% annual house price rise.

An increase demonstrates a stable economy and will be welcoming news for home owners and property investors alike who will benefit from this capital growth. Despite changing market conditions for landlords, we’re still seeing a strong demand for buy to let property across the board. Property continues to be the number one choice for investment as it continues to outperform other investment products and rising house prices combined with huge demand will result in this stance remaining unchanged."

Ged McPartlin, Director at Ascend Properties, said: “A monthly price rise of 0.2% may be modest but it really puts the UK market in a healthy position when we consider the UK economy as a whole.

This year has seen an election, a new government and changing buy to let conditions, yet the demand currently being felt across the UK for property is undeniable. Supply still remains an issue and whilst the housing shortage is beginning to be addressed, it’s apparent that some key cities across the UK, the north in particular, are more popular than ever. Manchester and Liverpool are currently experiencing record high levels of demand for property as a result of their strong economies and desirable prospects; it wouldn’t be surprising to see these regions outpace the national average in the coming months.”

Peter Goodman, Co-founder and CEO of Homelyfe, comments: “Today’s figures show that house price inflation has once again continued to rise, showing the robustness of the UK housing market. However, it remains that the market is still overburdened, which is having a real effect for prospective buyers.

Gazumping is a problem in England and Wales, with more than one in ten (13%) property purchases falling through due to a seller accepting a better offer from someone else, despite already accepting a verbal offer. The government has recently acknowledged this issue and is looking to review the home buying process and end gazumping. However, until steps are taken, it is fundamentally the insurance industry’s responsibility to educate homebuyers on how they can protect themselves against the loss of fees spent when a house purchase falls through - especially in these high-demand areas where purchasing a property is perilous business.”

Jonathan Hopper, managing director of Garrington Property Finders, comments: “The ‘steady as she goes’ headline figure hides the profound changes going on beneath the surface of Britain’s property market.

On one hand we’re seeing a levelling effect, with a steady flight of equity from London – and other overheated regions – to areas with greater affordability. So while this is hitting prices in many of the areas that saw the frothiest rates of growth during the boom, it’s simultaneously powering both buyer demand and price rises in regions where perceived value is better.

For now there is plenty of scope for this trend to continue, as buyers at all price points have become deeply price sensitive, and the affordability gap between regions remains huge after it doubled in the past decade. Affordability is set to remain a key factor as real wage growth falls further behind the pace of consumer price inflation.

While doomsayers have emphasised the impact an interest rate rise might have, any hike is likely to be modest and in the short-term it could give the market a lift as buyers rush to lock in a favourable rate. While fears over Brexit and the slowing economy have both played their part in slowing the market, the greatest inhibitor has been the punitive levels of Stamp Duty charged on high value homes.

While hobbling the top end of the market may play well with some voters, many in the property sector worry the trickle down effect could soon cause the mainstream market to slow substantially too – so all eyes will be on the Chancellor later this month to see if he will address the Stamp Duty elephant in the room and go beyond gimmicky giveaways to make meaningful changes.”

Jonathan Samuels, CEO of the property lender, Octane Capital, said: "The now familiar narrative of strong employment, a lack of homes for sale and low borrowing costs continues to prop up prices.
 
While a potential quarter point interest rate rise this week will be manageable, it's the impact on sentiment that is the unknown. There is no reason to think the first rate rise for a decade will trigger a property market meltdown, especially given that so may people are on fixed rate mortgages, but it does bring another element of uncertainty into play.
 
Hard numbers aside, rates rising for the first time in a decade will be a symbolic moment and could give prospective buyers more pause for thought, especially with the cost of living so high.
 
Arguably the real challenge comes not with the first rate rise for a decade but the one after that."

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "These figures are particularly interesting as we weren’t expecting to see much in the way of price growth, bearing in mind all the recent signals that interest rates may rise imminently. However, we have found that most of the people we talk to have already taken into account the possibility of a rise in interest rates as it has been talked about for so long.

We have certainly seen this pattern on the high street where shortage of stock and slow transaction rates are having an impact but certainly there is still sufficient confidence for buyers and sellers to move if the circumstances are right."

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: "Everyone is expecting a rate rise to happen tomorrow, whether it actually should or not as the Bank has backed itself into a corner. But with five-year Swap rates at 1% the market thinks the average position of base rate over the next five years will be one per cent, so there is no need for borrowers to panic. As Nationwide says, the minority of borrowers are on a variable rate so will be affected by a rate rise anyway.

However, we are not sure this is actually the end of the cheap mortgage deals. While a number of lenders have increased rates slightly, Nationwide actually reduced its mortgage rates this week and the ultra competitive lending market remains. It may well be that some of any increase is absorbed into lenders’ margins because they are still chasing business. The plethora of new lenders on the market means there is plenty of competition for business and lots of choice for borrowers."

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