29th November 2013
UK house prices are seeing their highest rates of growth in three years with prices up almost 7% in the past year according to Nationwide writes Philip Scott.
The building society has reported that the year-on-year increase in house prices climbed to 6.5% in November from 5.8% in October, 5.0% in September and 3.5% in August, representing the strongest annual rise since July 2010.
It added that prices rose by a robust 0.6% month-on-month in November, following increases of 1% month-on-month in October and 0.9% month-on-month in September. Consequently house prices were up by 2.6% in the three months to November compared to the three months to August.
The average house price on the Nationwide measure was £174,566 in November, which was the highest level since April 2008.
Robert Gardner, Nationwide’s chief economist, says: “Activity in the housing market has picked up strongly in recent months. The number of mortgage approvals for house purchase reached 66,735 in September, 34% higher than the same period of 2012. A large part of the improvement can be attributed to further improvements in the labour market and the brighter economic outlook, which has helped to bolster sentiment amongst potential buyers.
“Policy measures aimed at keeping down the cost and improving the availability of credit are also playing an important role. Indeed, mortgage rates have declined significantly from the already low levels prevailing last year.
Howard Archer, chief UK & European economist, at IHS Global Insight notes that the robust rise in house prices in November reported will maintain concern that the UK could be on its way to a new housing bubble.
He adds: “However, it is worth noting given all the debate of whether a house prices bubble is developing that on the Nationwide’s measure house prices in November were still 6.2% below the record high of £186,044 seen in October 2007.”
While the strength of house price rises in London is becoming an increasing concern and pushing up the overall national increase in house prices, Archer asserts we are currently some way off from an overall housing market bubble emerging.
He says: “There remains a very real danger that house prices could really take off over the coming months, especially if already significantly improving housing market activity and rising buyer interest is lifted appreciably further by the “Help to Buy” mortgage guarantee scheme which was launched in October.”
Yesterday the Bank of England and the Treasury announced it was to end Funding for Lending support to households from January, which Archers believes “looks a highly sensible decision”, although in itself it is unlikely to act as a major brake on housing market activity. He adds: “We believe that it is very important that the Bank of England has indicated that it is prepared to take further action to rein in the housing market if prices rise markedly amid ongoing strengthening activity.”