UK house prices unexpectedly rose last month, according to Nationwide building society, with some economists who had predicted a fall calling it a “massive surprise”.
The 0.9% month-on-month increase – which added more than £1,600 to the cost of a typical property – has been linked to a shortage of homes on the market for buyers to choose from. The last time Nationwide’s index showed a bigger monthly increase was in March 2022.
However, Britain’s biggest building society said the average property value was still down year on year – with a 3.3% drop in October compared with the same month last year. This is down from an annual drop of 5.3% recorded in September.
Nationwide said the average price of a UK property was £259,423 at the end of October – up from £257,808 a month earlier.
Robert Gardner, the lender’s chief economist, said: “The uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained.”
Sarah Coles, the head of personal finance at the investment platform Hargreaves Lansdown, said: “October’s bump comes down to a shortage of property for sale, making it more difficult for buyers to drive a hard bargain.” Sellers “sat on their hands” in October, she added.
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Gardner said there was little sign of “forced selling”, which would exert downward pressure on prices, as labour market conditions were solid and mortgage arrears were at historically low levels, despite difficulties for some homeowners.
Other commentators said the Bank of England’s decision on 21 September to keep interest rates on hold after a string of increases gave an autumn fillip to the housing market and would have calmed the nerves of many would-be buyers.
The housing market in Britain has slowed in recent months as the Bank has raised rates sharply to counter a rise in inflation triggered in part by Russia’s invasion of Ukraine, which sent energy prices soaring.
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Gardner said that, despite last month’s unexpected bump, UK housing market activity had “remained extremely weak”, with only 43,000 house purchase mortgages approved in September – about 30% below the monthly average in 2019.
He added: “Activity and house prices are likely to remain subdued in the coming quarters. Despite signs that cost of living pressures are easing, with the rate of inflation now running below the rate of average earnings growth, consumer confidence remains weak, and surveyors continue to report subdued levels of new buyer inquiries.”
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Imogen Pattison, an assistant economist at the consultancy Capital Economics, which had forecast a 0.6% fall in October, said last month’s large increase in house prices “was a massive surprise, given higher mortgage rates should be severely restricting the number of people able to buy and the amount they can spend”.
Most experts agreed that this was not the start of a recovery for the property market.
Last week, Lloyds Banking Group predicted UK house prices would continue to slide this year and in 2024, and would not start to recover until 2025.
Santander expects a larger drop of about 7% for the whole of 2023, followed by a 2% fall in 2024. The estate agent Knight Frank also predicts a 7% fall this year but a 4% decrease next year.
By Rupert Jones
Source: The Guardian