Overall the UK house price index level at 184.9 has dropped back slightly from the peak last month of 186. However, annual UK price growth has continued to increase due to larger falls in property prices in September 2012.
In the 12 months to September 2013 UK house prices increased by 3.8%, up from a 3.7% increase in the 12 months to August 2013.
The ONS said that house price growth remains stable across most of the UK, although prices in London are increasing faster than the UK average. The year on year increase reflected growth of 4.2% in England and 1.4% in Wales, offset by falls of 1.1% in Scotland and 1.5% in Northern Ireland.
Annual house price increases in England were driven by London at 9.4%, the South East at 4% and Yorkshire and the Humber at 3%.
Excluding London and the South East, UK house prices increased by 1.4% in the 12 months to September 2013.
On a seasonally adjusted basis, UK house prices were unchanged between August and September 2013.
In September 2013, prices paid by first time buyers were 5.3% higher on average than in September 2012. For existing owners prices increased by 3.2% for the same period.
The slight fall in the ONS house price index in September should relief any fears of a price bubble, according to Brian Murphy, head of lending at the Mortgage Advice Bureau. He added that the figures suggest that price growth is stable and the market affordable for consumers.
Stuart Law, chief executive officer of Assetz, also believes that there are no bubble conditions. ‘Part of the evidence for this is that buy to let investors are still able to achieve very good gross yields on their investments of around 7 to 8%. Just before the 2007 market peak, average yields were around 5% as property price growth was far greater than rises in rents. Investors at that point were speculating solely on continuing price growth and happy to accept cash losses on rental income after running costs,’ he pointed out.
He also believes that the only real way to address the housing shortage is to build considerably more homes but the consequence will be a slowing of house price growth.
According to Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), Help to Buy has significantly improved confidence and eased accessibility to the market, with higher LTV loans starting to open the door for those with smaller deposits who may not have otherwise been provided with an opportunity to get their foot on the ladder.
‘However, allowing more people to enter the market is not helpful if we do not have enough houses to satisfy demand. The UK market is overvalued on some metrics and affordability remains stretched for some individuals,’ he said.
‘This will continue until more houses are built. The government and industry need to work together to decide how to develop a market that is better able to support both home owning ambitions and the full spectrum of housing needs,’ he added.
