Annual house price inflation climbs to 3.9% in October according to Nationwide

29th October 2015


UK property prices rose by 0.6% in October, driving annual gains up to a five-month high 3.9% according to Nationwide.

The monthly gain was marginally above the 0.5% increase witnessed during September and 0.4% in both August and July.

On a year-on-year basis, the latest numbers mark a lift from the 26-month low of 3.2% in August.

Commenting on the figures, Robert Gardner, Nationwide’s chief economist, said: “Over the past five months annual price growth has remained in a fairly narrow range between 3% and 4%, broadly consistent with earnings growth over the longer term.

“While this bodes well for a sustainable increase in housing market activity, much will depend on whether building activity can keep pace with increasing demand.”

Notably the lender’s data is less far less bullish that the 8.6% annual rate in the three months to September reported by the Halifax.

Howard Archer, chief UK and European economist at IHS Global Insight however expects house prices to see “solid increases over the coming months amid firm activity”.

He said: “Given that house prices were soft in the latter months of 2014, this is likely to see annual house price inflation on the Nationwide’s measure move higher over the coming months.

“We believe that house prices are likely to see pretty solid increases over the coming months, but will not race ahead.”

Overall he anticipates that house prices will rise by around 6% over 2016 following an increase of around 4.5% year-on-year at the end of 2015, on the Nationwide’s measure.

Notably there was a drop in activity during September according to the British Bankers’ Association mortgage approvals data, which has generally risen through recent months.

Its numbers highlighted that mortgage approvals for house purchases fell to 44,489 in September after rising to an 18-month high of 46,567 in August from 46,171 in July and a 20-month low of 36,436 in December 2014.

Elsewhere, the latest Royal Institution of Chartered Surveyors survey showed that agreed sales in September were at their highest level since May 2014. The RICS survey also noted that buyer enquiries rose for a sixth successive month in September.

Looking ahead Archer added: “Housing market activity seems likely to be supported by largely helpful fundamentals, notably including stronger earnings growth, high employment, elevated consumer confidence and still very low mortgage interest rates. A robust buy-to-let sector is also lifting activity.”

However, Archer believes any upside is expected to be constrained by more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the likelihood that interest rates will start rising gradually during 2016.

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