Average house price tops £250,000 for first time - Nationwide
UK house prices edged higher in October, despite the stamp duty holiday coming to an end, industry data showed on Wednesday.
The Nationwide Monthly House Price Index came in at 497.8 in October, up on September’s 494.6, while the average price for a house in the UK is now £250,311, the first time it has topped a quarter of a million pounds.
On a seasonally-adjusted basis, house prices rose by 0.7% month-on-month, compared to September’s 0.2% improvement.
Year-on-year, prices rose by 9.9%, marginally down on September’s annual growth rate of 10.0% but above consensus expectations for growth of 9.2%.
Robert Gardner, chief economist at Nationwide, said: "Demand for homes has remained strong, despite the expiry of the stamp duty holiday at the end of September. Indeed, mortgage applications remained robust at 72,645 in September, more than 10% above the monthly average recorded in 2019.
"Combined with a lack of homes on the market, this helps to explain why price growth has remained robust."
However, the number of mortgage applications, while still above 2019’s monthly average, is now at a 14-month low, and Gardner conceded that the outlook for house prices remained "extremely uncertain".
He said: "It is still unclear how the wider economy will respond to the withdrawal of government support measures.
"Consumer confidence has weakened in recent months, partly as a result of the sharp increase in the cost of living. Even if the wider economic conditions continue to improve, rising interest rates may exert a cooling influence on the market."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The return of the threshold for stamp duty to £125,000 has done little to dampen the pick-up in house prices. Nationwide’s index was 2.1% higher in the three months to October than in the prior three months.
"The looming rise in mortgage rates, however, represents a much bigger threat to house prices. The relationship between changes in mortgages rates and house prices isn’t stable, partly because households can lengthen mortgage terms to offset the hit to monthly repayments from higher. In addition, the proportion of incomes that households are willing to devote to housing might have risen due to the pandemic, and the long-term shift to working from home.
"Nonetheless we think the rise in mortgage rates looks set to be abrupt enough to mean that house prices stagnate in the first half of 2022, and then rise only slowly in the second half."
Martin Beck, senior economic advisor to the EY Item Club, said: "Household income growth is under growing pressure from higher inflation and forthcoming tax rises. And mortgage rates are rising, as lenders are responding to expectations that the Bank of England will raise the official interest rate, perhaps as soon as Thursday’s meeting."