Nationwide: House prices jump amid constrained supply

House prices shrugged off the pressure of rising interest rates and the impact of inflation on consumers’ budgets to rise unexpectedly last month according to the latest data from Nationwide, one of the leading house price index providers. 

According to the building society, house prices increased by 0.9% between September and October, the first monthly rise since April and the largest since March 2022. 

And while that still left house prices down 3.3% from October last year, it was smaller than the 5.3% annual contraction registered in September 2023. 

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Nationwide said the average house price was £259,423 in October, down from a peak of £273,751 registered in August last year.

“The uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained,” said Robert Gardner, Nationwide's Chief Economist

Further, there’s “little sign of forced selling, which would exert downward pressure on prices, as labour market conditions are solid and mortgage arrears are at historically low levels.”

Will house prices keep rising? 

While Nationwide’s data suggests the outlook for the housing market isn’t as bad as some commentators have suggested, it’s unlikely to suggest house prices have stopped falling. 

Nationwide is just one of several house price indices, and it’s the smallest, using the data of around 12,000 mortgage transactions the lender processes every month. 

In comparison, the UK HPI index uses data from 100,000 transactions a month, aggregating data from HM Land Registry, Registers of Scotland and Land and Property Services Northern Ireland (Rightmove’s index uses a similar number of data points but is based on advertised sale price). 

Other indices have recorded the following moves over the past few weeks:

• Zoopla: Prices fell 1.1% in September
• ONS: House prices up 0.2% in the year to August
• Rightmove: Asking prices up 0.5% – lowest seasonal increase since 2008
• Halifax: Prices fell 0.4% in September

Other data lays bare the cracks appearing in the property market. 

Data published by the Bank of England earlier this week showed net mortgage approvals for house purchases fell to 43,300 last month from 45,400 in August - 35% below September 2019’s level. Net approvals for remortgaging dropped to 20,600, the lowest since January 1999.

“Just yesterday, new figures showed the UK property market remains in a deep freeze, as UK residential transactions fell by 17% in September compared to the year prior,” noted Karen Noye, mortgage expert at Quilter. 

“What would typically be a busy summer has been remarkably quiet as buyers have been in ‘wait and see’ mode. Given the property market tends to slow in the winter months anyway, we could see house prices buckle under the pressure and this 0.9% uptick may prove to be a one-off,” Noye added.

Tom Bill, Head of UK Residential Research at Knight Frank, agrees and says there are many reasons for the continued slowdown: “Sentiment in the UK housing market is weak but unlike the early months of Covid or the period following the mini-Budget, there is no single cause. There is financial pain from higher mortgage rates, hesitancy as the Bank of  England struggles to contain inflation, and uncertainty as a general election looms and conflict  persists in the Middle East.”

Knight Frank expects UK prices to fall by 7%  this year and 4% next year as “inflation comes under control and mortgage rates stabilise.”