Annual house price growth in the UK has picked up slightly with the latest index showing growth of 2.5% in October, up from 2.3% in the previous month.
The data from lender the Nationwide also shows that month on month prices increased by 0.2%, taking the average price of a home to £211,085.
Robert Gardner, Nationwide’s chief economist, said that the market is stable with the annual growth figure remaining within the 2% to 4% range since March of this year.
‘Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appears to be weighing on confidence,’ he explained. He also pointed out that a lack of homes on the market is providing support to house prices.
It means that first time buyers are still likely to struggle to get on the housing ladder, according to Jeremy Duncombe, director of the Legal & General Mortgage Club. ‘House prices continue to rise annually and if we couple this with the costs of stamp duty, younger buyers clearly face a big challenge,’ he said.
‘Until the Government sets out a package of measures to build thousands more homes for our growing population and ease the stamp duty barrier on younger buyers and older home owners, the status quo will only continue. The Autumn Budget is just around the corner, and that provides a perfect opportunity for the Government to address the challenges facing Britain’s housing sector and get started on the path to a fairer market for all,’ he added.
Russell Quirk, chief executive officer of eMoov, believes that the housing market is showing defiance in the face of political and economic challenges and has outperformed wider negative predictions.
‘With a slow but consistent recovery from such detrimental proceedings as the European Union referendum and the shambolic snap election, it is unlikely that any marginal increase in interest rates that may come this week will stifle this growth,’ he said.
‘Not only will any rates rise seen this week be financially palatable for UK home owners, a swelling population both native and from abroad, coupled with a severe lack of building stock being built, will see prices remain inflated to do the imbalance between supply and demand,’ he added.
The figures hide change in the market, according to Jonathan Hopper, managing director of Garrington Property Finders. ‘On one hand we’re seeing a levelling effect, with a steady flight of equity from London, and other overheated regions, to areas with greater affordability,’ he said.
‘So while this is hitting prices in many of the areas that saw rates of growth during the boom, it’s simultaneously powering both buyer demand and price rises in regions where perceived value is better. For now there is plenty of scope for this trend to continue, as buyers at all price points have become deeply price sensitive, and the affordability gap between regions remains huge after it doubled in the past decade,’ he explained.
He believes that affordability is set to remain a key factor as real wage growth falls further behind the pace of consumer price inflation and like Quirk does not think that a modest rise in interest rates is likely to be detrimental. Indeed he said that in the short term it could give the market a lift as buyers rush to lock in a favourable rate.
‘While fears over Brexit and the slowing economy have both played their part in slowing the market, the greatest inhibitor has been the punitive levels of stamp duty charged on high value homes. Many in the property sector worry the trickledown effect could soon cause the mainstream market to slow substantially too. So all eyes will be on the Chancellor later this month to see if he will address stamp duty and go beyond gimmicky giveaways to make meaningful changes,’ he added.