The rise takes the average property price to £173,678 and according to Robert Gardner, Nationwide's chief economist, the UK housing market appears to be following the more resilient upward trend evident in the wider economy in recent quarters.
He said that the 1% increased over the month in October means that prices are maintaining the momentum that has been building in the second half of 2013. After averaging less than 1% in the first half of the year, the annual pace of house price growth accelerated to 5.8% in October from 5% the previous month.
‘The ability and willingness of potential buyers to transact has been steadily increasing. The ability to buy has been supported by continued gains in employment and policy measures such as the Help to Buy and Funding for Lending schemes, which have improved the availability and lowered the cost of credit. Mortgage rates are close to all time lows,’ he explained.
‘The willingness of potential buyers to step into the market has also been increasing. While employment has been rising steadily for some time, it is only in the last few quarters that consumer sentiment has improved markedly. This may in part be the result of the improved performance of the wider economy. The UK economy expanded at a healthy 0.8% quarter on quarter pace in the third quarter, the third consecutive increase and the fastest pace of growth for three years,’ he added.
Gardner also pointed out that house price growth has accelerated as buyer demand has picked up more quickly than the supply of new homes. But the risk is that if demand continues to strengthen while the supply of property remains constrained affordability could become stretched. Indeed, average wages have continued to decline in real terms even though employment growth has been fairly robust in recent years.
‘Nevertheless, while house price growth has picked up, at a national level prices remain around 7% below their 2007 peak. Moreover, typical mortgage servicing costs remain modest by historic standards thanks to the ultra-low level of interest rates. A typical mortgage payment for a first time buyer is currently equal to around 29% of take home pay, in line with the long term average,’ said Gardner.
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