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House prices grew by 5% in the year to September, the highest annual growth rate for four years, according to the latest Nationwide House Price index.
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Month-on-month, house prices rose by 0.9% after a 2% rise in August that pushed up the average UK house price to £226,129.
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Most UK regions saw a small rise in annual price growth in quarter three compared to the previous quarter.
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The South West was the strongest performing region, with annual price growth rising from 2.3% to 5.5% and for the first time since 2017, house price growth in southern England exceeded that in northern England.
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Annual house price growth in London was up 4.4% in Q3 driving the cost of the average property in the capital to a record high of £480,857. Homes are now selling for 57% more than their 2007 price tags.
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In the UK, prices are 21% higher than their 2007 peak.
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Scotland was one of the few areas to see a slowing in the annual rate of price growth to 2% in Q3, compared to 4% in Q2. Meanwhile, Wales saw annual growth accelerate to 3.8% from 1% in the previous quarter.
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Pent up demand is one of the drivers behind price rises. Almost 20% of households surveyed by Nationwide in September, who were considering moving before the pandemic, had put their plans on hold.
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Nationwide chief economist Robert Gardner said: “Housing market activity has recovered strongly in recent months. Mortgage approvals for house purchase rose from around 66,000 in July to almost 85,000 in August – the highest since 2007, well above the monthly average of 66,000 prevailing in 2019.
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“The rebound reflects a number of factors. Pent-up demand is coming through, with decisions taken to move before lockdown now progressing.
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“The stamp duty holiday is adding to momentum by bringing purchases forward. Behavioural shifts may also be boosting activity as people reassess their housing needs and preferences as a result of life in lockdown.”
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Weaker economy effects
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Economic forecasters expect labour market conditions to get significantly weaker as tighter restrictions on movement supress economic activity and the furlough scheme is replaced with a less comprehensive jobs support package.
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Despite this, some households who were not planning on a move, have changed their minds because of the crisis.
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Around 10% of those surveyed in September said they were in the process of moving as a result of the pandemic, with a further 18% considering a move for the same reason.
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This sentiment was highest in London where 25% of households said there were now considering moving and close to 20% said they were actually moving.
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Jeremy Leaf, former Royal Institution of Chartered Surveyors residential chairman, said: “There is little sign on the ground yet that this report and others which have emerged recently reflect the calm before the storm and a fizzling out of the mini-boom.
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“Certainly increased restrictions and the unwinding of the furlough scheme will have some impact on confidence but not much at the moment.
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“Of just as much concern to our buyers, and particularly those vital first-time buyers, is mortgage accessibility with lenders running the risk of reducing activity in the market at a time when it is so vital to the economy generally.”
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Written by: Samantha Partington
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Source: Your Money
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