Annual house price inflation in the UK is positive for the first time since March 2008 after the latest monthly index shows values up for the sixth month in a row, although the pace of growth is slowing.
There are also concerns that prices could dip due to the UK still being in a recession and the stamp duty holiday on properties valued at £175,000 or less due to finish at the end of the year.
The figures from the Nationwide building society show that residential property prices increased 0.4% in October, less that the increase of 0.9% in September and 1.4% in both July and August. It means that the three month on three month rate of change, generally a smoother indicator of the near term trend, dropped back slightly from 3.8% to 3.4%.
The average property now priced at £162,038, with some 2.0% higher than a year earlier, it the first time since March 2008 that the annual rate of change has been in positive territory.
Over the first ten months of 2009, the seasonally adjusted index of house prices has risen by 4.6%, though relative to the October 2007 peak it is still down by 13.1%.
According to Martin Gahbauer, Nationwide’s Chief Economist, a moderation in the rate of house price inflation was to be expected as the very strong monthly increases seen over the summer months were unlikely to be sustainable over the long run. ‘Slower house price inflation is also consistent with developments in housing market activity, as industry figures have shown that the pick-up in mortgage approvals for house purchases has lost some momentum in recent months,’ he said.
‘Although too early to tell for sure, it may also reflect a more natural level of stock available for sale coming to the market, alleviating some of the extreme shortages of property on the market seen during most of this year,’ he added.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, welcomed the figures but warned that a dip in the market cannot be ruled out. ‘The latest gain in house prices caps a generally good news week for the housing market with transaction levels continuing to recover according to the Land Registry and net mortgage lending rising a little further,’ he said.
‘But a key issue for the market going forward is how it copes with the planned ending of the stamp duty holiday on properties valued at £175,000 or less. This is likely to be less of a problem in London and the South East but elsewhere, it could have more of an impact,’ he warned.
‘The significance of this is that property sales, although picking up, are still well down on what may be considered normal. At a time when first time buyers are still struggling to access mortgage finance and, in most cases, reliant on hefty support from parents to take an initial step onto the market, the risk is that the move to end the holiday could arrest the tentative improvement in turnover,’ added Rubinsohn.