October saw a surprising leap of 1.1% in house price growth in October – the largest leap in house price inflation all year – bringing the average price of a house in the UK to £186,044 says a new report. The annual rate of growth also jumped up from 9% to 9.7%, which is healthy although not as high as the 11.1% recorded in June, according to Nationwide’s house price report for October.
However, the 3-month on 3-month rate of price growth, a good indicator of trends, also rose but more modestly from 1.7% to 1.9%, a figure which remains below the average figure for 2007 of 2.2%.
This strong performance in October could be taken as a sign the market remains robust, although Nationwide says that there is still a weakening in market activity. ‘While some may be tempted to interpret October’s numbers as a sign that house prices are immune to deteriorating affordability and tightening credit conditions, such a conclusion would be misguided,’ said Fionnuala Earley, Nationwide’s chief economist.
New instructions and stock levels remain low, and undersupply is driving prices higher: ‘The stock of unsold homes is still relatively low, and this is providing some residual support to prices. The underlying dynamics of the market, however, are clearly not as strong as this time last year,’ she added.
Ed Stansfield from Capital Economics said the report indicates softer demand is taking a few months to properly have an effect on the market: ‘The surprisingly strong rise in October seems at odds with the growing evidence of weaker buyer confidence, slowing mortgage demand and easing house price pressures shown by most other housing market indicators. As such we would be wary of interpreting today’s data as evidence that the housing market remains robust,’ he said.