UK Sept house prices up 1.3 pct from Aug - Nationwide

The UK property market was robust in September as buyers shrugged off the quarter point rate hike in August, Nationwide, the country's biggest building society reported. House prices increased by 1.3 pct in September from the previous month, bringing the annual rate to 8.2 pct. Analysts polled by AFX News had predicted much smaller increases of 0.4 pct and 7.0 pct respectively.
Commenting on the figures Fionnuala Earley, Nationwide's Group Economist, said: "A weak patch this time last year, when prices fell by 0.2 pct, exaggerates the annual increase, but the more recent three-month-on-three-month series still shows a clear pick up in price growth since July." The average UK house now costs 169,413 stg almost 13,000 stg more than at this time last year and the equivalent of a rise of more than 35 stg per day over the last 12 months. Earley said demand in the housing market seems firm but that supply was short. Buy-to-let landlord demand looks to remain strong for some time to come, she added. "We expect interest rates to be increased again in November, but there is little chance that mortgage rates will increase to 7 pct as a result. However, increases in interest rates do affect expectations about future house price growth and hence house purchase decisions," Earley said. She said this may signal that demand will begin to cool, particularly as other costs such as utility bills increase sharply. Howard Archer at Global Insight said house prices may well see further marked increases in the near term, given the current level of mortgage activity, survey evidence, showing strong buyer interest, strong demand from the buy-to-let sector and a reported shortage of properties in some areas. "Nevertheless, we continue to believe that house prices will ultimately be reined in by affordability constraints and will settle down into an extended period of relatively modest rises." he added. He added that the current buoyancy of house prices will be of concern to the Bank of England, adding to the case for another interest rate hike in November. The central bank lifted the benchmark repo rate by a quarter point in August, to 4.75 pct. Another increase, to 5.00 pct, is expected in November.