Nationwide BS  

House price rises pause in October

House price rises pause in October

UK house prices were stable in October after fifteen successive monthly increases, data from the Nationwide House Price Index reveals.

The lender attributes the lull to residential property transactions falling 10 per cent below the numbers recorded in the same period of 2015.

Nationwide believes this reflects the after-effects of the introduction stamp duty on second homes introduced in April, where buyers brought forward transactions to Q1 to avoid additional stamp duty liabilities. Policy changes impacting the buy to let market may also be playing a role in dampening activity. 

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Robert Gardner, chief economist at Nationwide, sees conditions favouring further price rises.

“While the economic outlook is uncertain, solid labour market conditions and historically low borrowing costs should provide support to buyer confidence," he said. 

"Moreover, the relatively low number of homes on the market and modest rates of housing construction are likely to keep the demand/supply balance fairly tight, even if economic conditions weaken in the quarters ahead, as most forecasters expect."

The lack of a price rise in October meant the annual rate of house price growth slowed to 4.6 percent, from 5.3 percent in September.

Over the past three years, house prices increased by around 20 per cent while wages have risen by around 6 per cent, according to Nationwide. This means the typical house now costs six times average earnings, up from 5.3 times earnings in 2013.

However, Gardner noted that the steady decline in borrowing costs over the same period has helped to lessen the impact on affordability for home buyers.

"The typical mortgage payment expressed as a share of average take home pay is little changed over the period and is still in line with the long-run average," he said.

Experts see low borrowing costs as buoying the market.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: "Buyers and sellers are pulling out all the stops where they can to take advantage of lower borrowing costs as many appreciate that they won’t be around for ever as inflation will inevitably take its toll."

While Mark Harris, chief executive of mortgage broker SPF Private Clients, cited the keenness of lenders to make loans.  

"A lot of lenders are keen to grow their business as banks only make money when they lend money: they have to lend it responsibly but there is a fair bit of competition out there for business."