UK property prices accelerating

UK house prices have increased by 0.9% in September and are 5% higher than a year ago as values accelerate, according to the latest index from Nationwide published last week.

The figures show that southern regions of England, especially London, continue to record the strongest rates of house price growth and the typical UK home is worth £172,127 as price growth reaches its strongest paces since July 2010.

The increase in house prices will spark a rise in rental values, generating average returns of 13% in the next twelve months, that’s more than £22,000 per property, a report found.

Robert Gardner, Nationwide’s chief economist, said there are signs that the pick-up is becoming increasingly broad based. For the first time since 2007, all 13 UK regions experienced annual house price growth in the third quarter of 2013.

However, southern regions of England continued to see the strongest rates of growth, especially London, where the annual rate of growth reached double digits in the three months up to September.

‘The gap between house prices in the North and the South of England reached a new high in the third quarter of this year, rising above £100,000 for the first time. The typical property price in the South of England is now 74% above its Northern equivalent,’ explained Gardner.

There is still significant regional variation, with prices in Scotland, Wales and the North of England around 12% to 14% below their previous peaks, while in many southern regions prices are 5% to 7% lower. Only in London are prices at an all-time high, some 8% above the previous peak.

Gardner said that demand is being supported by an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures such as Funding for Lending Scheme and Help to Buy.

‘The improving economic outlook is also encouraging more people to take their first steps into the property market. Consumer confidence has increased significantly in recent months, thanks to further modest gains in employment and signs that the UK recovery is finally gathering momentum,’ he explained.

Furthermore, Gardner also pointed out that while there have been positive signs that house building is starting to recover, construction is still running well below what is likely to be required to keep up with current demand. New housing builds started in the UK were up 33% in the second quarter of 2013 compared to the same period of 2010. However this is still 36% below the levels prevailing in 2007, which were already below that required to keep pace with household formation.

The Nationwide’s quarterly figures, also published today, show that the price of a typical house rose by 2.2% in the third quarter of 2013, after season effects were taken into consideration. Prices were up 4.3% compared with the same quarter during the previous year.

Amongst the English regions, the South of England and the Midlands continued to outperform the North. Outside of London, East Anglia was the strongest performing region, with annual price growth of 6.6%, whilst the North was the weakest English and also UK region, with prices up 0.2% over the year.

The findings will spark fresh concerns that Government cheap credit schemes designed to kick-start the housing market are only helping wealthier investors rather than first-time buyers struggling to get onto the property ladder.

House builders believe the real reason for rising property prices and rental values is the sheer lack of available property and new homes being built.

The sudden and dramatic upturn in activity has led to a 20 per cent surge in bricklayer’s salaries in the past six months. And there are shortages of bricks and blocks in “hotspots” across the UK, with brick prices tipped to rise 10 per cent.

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Gaurav Ahluwalia