House price annual growth was strongest in Northern Ireland at 10.2% followed by England at 6.4% and there was a 1.1% rise in Wales and Scotland.
Annual house price increases in England were driven by the East with year on year growth of 8.4% and the South East up 7.4%. But excluding London and the South East, UK house prices increased by 5% in the 12 months to September 2015.
The data also shows that in September 2015, prices paid by first time buyers were 4.3% higher on average than in September 2014. For owner occupiers prices increased 6.9% for the same period.
Neal Hudson, associate director of Savills research, pointed out that the continued growth in the ONS house price index highlights the impact of increasing competition by mortgage lenders on a low stock housing market.
‘Potential buyers that have a deposit are benefiting from historically low mortgage rates, increasing net lending, and are now able to borrow record high multiples of their income. That is despite the introduction of tougher affordability tests following MMR last year. The average buyer no longer has an average income, and so home ownership remains a dream for the many who still aspire to it,’ he added.
The growth is being driven by constricted supply and fewer home owners selling, according to Rishi Passi, chief executive officer of Oblix Capital. ‘Improving economic conditions, rising wages and postponed interest rate rise expectations are all also bringing more buyers to the market, stoking up demand and inflating prices in the lower end of the market,’ he said.
‘The good news is that rising prices in this band will attract further investment and provide opportunities for developers, especially SMEs and should lead to an increase in attention paid to providing houses for this underserved end of the market,’ he added.
Alex Gosling, chief executive officer of online estate agents HouseSimple, believes that there is likely to be a slight cooling in price growth in the coming weeks leading up to Christmas.
‘But, while demand continues to significantly outstrip supply, and interest rates remain static, we could well see a price spurt at the beginning of 2016. The market desperately needs a boost in new properties being listed if supply is ever to come close to catching up with demand,’ he added.
First time buyers could be being outbid by existing home owners because they are more reliant on mortgages which are constrained by tougher lending criteria, according to Rob Weaver, director of Investments at property crowdfunding platform Property Partner.
‘Despite cheap finance, the tightening of the lending rules has made it increasingly difficult to get a mortgage and hence may be having a negative impact on supply. Longer term, property remains a good, solid investment for most people. It is important to get on a rung of the ladder as history teaches us that there are periods when growth races away. When this happens, you want to be invested in property for its potential capital growth and rental income, not left on the sidelines,’ he explained.
Jonathan Hopper, managing director of buying agents Garrington Property Finders, pointed out that while London growth is currently being outpaced by that seen in the East and South East of England, lack of supply means it won’t be long until the city comes back again.
‘The average price of a home in London has now reached the half million mark – but won't stay there long as strong demand collides with a sustained shortage of supply. With RICS reporting that the numbers of homes coming onto the market has fallen every month since February, the shortage of stock is endemic in several areas, and the current rate of demand can never be completely met,’ he said.
‘The only exception is at the very top of the market, where the Stamp Duty standoff continues. With the most expensive properties still taking longer to sell than usual, buyers who face much higher Stamp Duty bills are negotiating much harder and successfully driving down prices in some areas,’ he explained.
‘But for the rest of the market there's little prospect of an abrupt end to price rises. With consumer prices still falling and the Bank of England in no hurry to raise interest rates, the cost of borrowing will stay low and buyer confidence high well into 2016. Together these factors will continue to stoke demand well beyond what supply can meet. The inevitable result is continued inflationary pressure,’ he added.
Hannah Maundrell, editor in chief at money.co.uk, believes that owning and renting is quickly becoming unaffordable and it’s hard to see how even the Government’s well intended Help to Buy initiatives are going to solve this problem.
‘With massive regional differences across the UK, would be home owners should think strategically about where they buy. The difficult choice could be that living near loved ones is no longer an option if you want to take that all important first step on the ladder,’ she said.
