UK house prices make small gains

Property prices in Britain rose by 0.4% during October to take the annual rate into positive territory for the first time since last March, figures revealed today.

The average value of a UK house increased to £162,038 (€180,000) after six months in a row of rises, helping prices grow year-on-year by 2% in October, according to the Nationwide Building Society.

But the data showed a slowdown in the monthly pace of increase following the buoyant summer months, down from 0.9% in September and 1.4% in both July and August.

Nationwide said the ease in monthly growth may signal that more properties are coming on to the market.

Martin Gahbauer, Nationwide’s chief economist, said: “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.”

He added: “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.”

Today’s figures are consistent with borrowing data out yesterday that showed a slowdown in activity, with net mortgage lending in the UK last month – up by £922m (€1.03bn) - easing in comparison with August.

Nationwide warned the UK’s failure to lift out of recession in the third quarter may further hamper the housing market recovery.

A deeper and longer recession could lead to higher unemployment and subdued wages, which could hit property prices, according to the group.

But the fall in third quarter gross domestic product has also increased the likelihood that interest rates will stay low for some time in a possible boost to property conditions.

“As a result, mortgage affordability will remain relatively favourable for both new and existing borrowers – this should limit the number of distressed sales and cushion the negative impact of labour market weakness on housing demand,” said Mr Gahbauer.