Steady Increase in UK property Prices Continues with 1% Growth in October

This article by the Property Wire on October 31st, 2013 reveals that house prices in UK continue to rise at 1% in October.

UK house prices increased by 1% in October and are now 5.8% higher than October 2012 but remain some 7% below the peak of 2007, according to the latest monthly index from the Nationwide Building Society.
 
The rise takes the average property price to £173,678 and according to Robert Gardner, Nationwide's chief economist, the UK housing market appears to be following the more resilient upward trend evident in the wider economy in recent quarters.

He said that the 1% increased over the month in October means that prices are maintaining the momentum that has been building in the second half of 2013. After averaging less than 1% in the first half of the year, the annual pace of house price growth accelerated to 5.8% in October from 5% the previous month.

‘The ability and willingness of potential buyers to transact has been steadily increasing. The ability to buy has been supported by continued gains in employment and policy measures such as the Help to Buy and Funding for Lending schemes, which have improved the availability and lowered the cost of credit. Mortgage rates are close to all time lows,’ he explained.

‘The willingness of potential buyers to step into the market has also been increasing. While employment has been rising steadily for some time, it is only in the last few quarters that consumer sentiment has improved markedly. This may in part be the result of the improved performance of the wider economy. The UK economy expanded at a healthy 0.8% quarter on quarter pace in the third quarter, the third consecutive increase and the fastest pace of growth for three years,’ he added.

Gardner also pointed out that house price growth has accelerated as buyer demand has picked up more quickly than the supply of new homes. But the risk is that if demand continues to strengthen while the supply of property remains constrained affordability could become stretched. Indeed, average wages have continued to decline in real terms even though employment growth has been fairly robust in recent years.

‘Nevertheless, while house price growth has picked up, at a national level prices remain around 7% below their 2007 peak. Moreover, typical mortgage servicing costs remain modest by historic standards thanks to the ultra-low level of interest rates. A typical mortgage payment for a first time buyer is currently equal to around 29% of take home pay, in line with the long term average,’ said Gardner.

Brian Murphy, head of lending at the Mortgage Advice Bureau (MAB), beleives that driving this steady procession is an increased sense of consumer confidence and willingness to enter the market, as Help to Buy and Funding for Lending schemes make mortgage finance more accessible.

But he does not think this will lead to a house price bubble. 'House prices are rising from a low starting point and the national average is still 7% lower than the 2007 peak. Regional variations mean that the dizzying heights of London house prices do not necessarily apply to the rest of the country, painting a far less fatalistic picture than many would suggest,' he said.

'With mortgage rates at historic lows, it’s unsurprising that consumers are grabbing the opportunity to jump on the property ladder with both hands. However, we must ensure that those with low deposits are not left behind at the starting line and that mortgage finance remains accessible and affordable,' he added.

According to Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), there is renewed vigour in the market, as illustrated in the continuing upward trajectory in the Nationwide index. 'Although there are concerns that a bubble is being formed around London and the South East, other indices confirm that growth is now being experienced in the majority of regions,' he explained.

'Although it will take a while to come into full effect, the Help to Buy mortgage guarantee will provide the market with further impetus, so we expect to see house prices continue to rise until some limiting factors emerge,' he added.

Article Source: http://www.propertywire.com/news/europe/nationwide-house-prices-index-201310318407.html

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