House prices up – again

House buyers once again shrugged off recent rate increases and sent prices up by an unseasonably strong 1.3 percent in September. Bringing annual growth to 8.2 percent according to the Nationwide’s figures released today. The rate is the highest since February 2005.

The consensus was that prices would see smaller increases of around 0.4 percent.

The average house price in the UK is now £169,413 – so to buy the average house you’d need to be earning £50,000 (UK average salary is £22,500).

Fionnuala Earley, Nationwide’s group economist said "Just like the weather, the housing market was unseasonably warm in September as August’s interest rate hike did nothing to cool the rate of house price inflation,"

"However, fewer sellers willing to put their properties on the market is adding to already squeezed supply which increases price pressure."

Buy-to-let landlord demand was particularly strong and looked set to support the market for some time to come, it said, especially amid strong demand for rented accommodation from migrant workers.

"Around two-thirds of existing landlords have plans to extend their portfolios and many have access to finance from gearing their existing portfolios," the Nationwide said.

Earley commented that she expected to see The Bank of England increase rates in November and that this, along with increases in utility bills would help cool the property market.

It’s healthy to see such comments from officers of a lender. Ironically Ms Earley’s previous words and warnings seem to have fallen on deaf ears at both the BoE and the government. With the BoE fixated on the CPI and the government focusing on creating a ‘feel good’ factor during the succession from Mr Blair to, presumably Mr Brown there is no chance that the government will rock the boat by precipitating a decline in house prices.

At the same time it was interesting to note that the buy-to-let market has been buoyed up by the demand for rental accommodation from the recent surge in immigration from mainland Europe. Most of these workers head for the cities (mainly London) so prices may continue to increase even as bank rates increase as well.

Don’t expect any interference from the government until after next summer.