House prices now at the same level as 12 months ago

The latest Nationwide Monthly House Price Index has revealed that house prices rose by 0.9% in September, the fifth consecutive monthly increase.

House prices rose in all regions during the third quarter of 2009. Southern regions saw stronger growth than northern regions and prices in Northern Ireland increased for the first time in two years

Comparing the three months to September with the three months to August is thought to give a more accurate picture of the underlying trend. This figure show that prices rose from 3.3% increase in August to a 3.8% increase in September. This is highest rate of growth since August 2004.

Martin Gahbauer, Nationwide’s Chief Economist, said:

“At £161,816, the average price of a typical UK property was essentially unchanged from a year earlier, representing the first time since March 2008 that the year-on-year rate of change has not been negative. Over the first nine months of 2009, the seasonally adjusted index of house prices has risen by 4.1%, though relative to the October 2007 peak it is still down by 13.5%.”

“The further increase in house prices is very much consistent with improvements in a broad range of economic and financial indicators over the last few months, all of which suggest that the most intense phase of the recession and financial crisis has probably passed. However, given that the housing market still faces considerable headwinds in the form of high unemployment, restrictive credit conditions and an impending withdrawal of the stamp duty holiday, it would be surprising to see house prices continuing to increase at the very strong rate seen in recent months.”

“One reason to remain cautious about the outlook for house prices is that turnover in the market is still well below normal levels. The housing turnover rate – measuring the percentage of the private sector housing stock changing hands on an annualised basis – fell to only 3% at the end of 2008. Although it has since recovered to nearly 4%, there is still quite some way to go before turnover reaches the pre-downturn level of between 7% and 8%. Lead indicators, such as mortgage approvals for house purchase, suggest that turnover should continue edging higher over the next few months, but at the current rate of increase it would take another 18 months for it to reach pre-downturn levels.”

Commenting on Nationwide figures, NAEA chief executive Peter Bolton King said:

“Further evidence that the housing market is recovering should be welcomed and these figures back up what NAEA members are telling us. However recovery is a fragile process and not guaranteed.”

“Househunters need access to mortgages from the major lenders. The Government’s flawed stamp duty policy also needs re-examining, otherwise these positive signs risk being short-lived.”