What's behind the rise in house prices?
UK house prices rose by 0.7% in September, according to the latest Nationwide House Price Index.
This uptick in prices pushed the annual growth rate to 3.2%, up from 2.4% in August, marking the fastest pace of growth since November 2022. Despite the increase, average house prices remain about 2% below the all-time highs reached in summer 2022.
“Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters,” said Robert Gardner, chief economist at Nationwide Building Society.
“These trends have helped to improve affordability for prospective buyers and underpinned a modest increase in activity and house prices, though both remain subdued by historic standards.”
According to the Nationwide report, most regions experienced a pickup in house price growth during the third quarter of 2024. Northern Ireland saw the strongest growth, with prices rising 8.6% year-on-year. Scotland’s annual growth rate accelerated to 4.3%, up from 1.4% in Q2, while Wales recorded a more modest 2.5% increase compared to 1.4% in the previous quarter.
In England, house prices rose 1.9% year-on-year. Northern England, which includes regions such as the North West and Yorkshire & The Humber, continued to outperform southern regions, posting a 3.1% annual increase. The North West was the top-performing English region, with prices rising 5% year-on-year.
Southern England, which includes areas such as the South West and London, saw a more subdued increase of 1.3% annually. London led the southern regions with 2% annual growth, while East Anglia was the only UK region to record a decline, with prices falling 0.8% year-on-year.
Meanwhile, terraced houses experienced the largest price increase over the past year, with prices rising 3.5%. Semi-detached homes and flats saw gains of 2.8% and 2.7%, respectively, while detached homes had more modest growth of 1.7%.
Looking at longer-term trends, detached properties have seen stronger growth since the start of the pandemic. Since Q1 2020, the average price of a detached home has risen nearly 26%, compared to a 15% increase for flats. This is likely due to the increased demand for larger living spaces during the pandemic.
“Competition among lenders to offer cheaper mortgage rates is boosting housing market activity and property prices,” said Mark Harris, chief executive of mortgage broker SPF Private Clients.
“Many buyers were waiting for rates to come down before taking action, and now that the Bank of England has made that all-important first cut, with another expected in November, this will further encourage those who may be wavering. The housing market appears to be on a firmer footing with buyer and seller confidence noticeably stronger.”
For Tanya Elmaz, director of intermediary sales at property lender Together, the annual rise in house prices is a further sign of the market’s wider recovery.
“Activity continues to tick over, despite there being some reservations around what’s to come from the Autumn Budget. Indeed, while most buyers and sellers are pressing on with their property plans, with Starmer’s warnings of the ‘tough’ announcements expected next month and the Bank of England deciding to hold rates this month, some may prefer to wait for further falls in mortgage rates before making their property move.
“However, for anyone keen to act now, it’s best to consider the range of products and schemes designed to help.”
Verona Frankish, chief executive of estate agency Yopa, added that the current outlook was an “extremely positive one” when compared to just a year ago.
“We’ve seen considerable improvements on all fronts, with buyer demand climbing, more homes going under offer and sellers achieving stronger prices in the process,” she said. “As a result, house prices are now just 2% off the record highs seen during the summer of 2022, and we could well see a new record set before the year is out.”
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