It shows that southern regions of England, especially London, continue to record strongest rates of house price growth and the typical UK home is now worth £172,127 as price growth reaches its strongest paces since July 2010.
Robert Gardner, Nationwide's chief economist, said that there are signs that the pickup 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, the 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 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.
‘The acceleration in house price growth from the subdued pace prevailing throughout 2011 and 2012 has been surprisingly quick, though house prices are still some way below their previous peaks in most parts of the country. Overall, UK house prices are still around 8% below their 2007 highs,’ he pointed out.
However, 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 the 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.
But he also pointed out that while there have been encouraging signs that house building is starting to recover, construction is still running well below what is likely to be required to keep up with demand. New housing starts in England were up 33% in the second quarter of 2103 compared to the same period of 2012, but this is still 36% below the levels prevailing in 2007, which were already below that required to keep pace with household formation.
‘The risk is that if demand continues to run ahead of supply, affordability may become stretched. House price growth has been outstripping average earnings growth since the middle of the year, for the first time since late 2010. However, affordability is being supported by the ultra low level of interest rates. A typical mortgage payment for a first time buyer is currently equal to around 29% of take home pay, in line with the long term average,’ added Gardner.
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 allowing for seasonal effects. Prices were up 4.3% compared with the same quarter of 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.
London is the most expensive region and continued to see the strongest annual price growth with prices up 10% year on year. Prices climbed to a new record high of £331,338, some 8% above their 2007 peak. Lambeth saw the strongest growth, with prices up 16% year on year, whilst Redbridge was the worst performing area in London with zero growth over the last 12 months.
Northern Ireland is the least expensive region but it recorded its first annual price rise since 2007, albeit a modest 0.9% increase. Nonetheless, the average price level appears to have stabilised following five consecutive years of decline. At £108,671, average prices are 52% below their 2007 peak. Belfast was the best performing area, with annual growth of 3%.
Scotland saw a 1.5% seasonally adjusted price rise in the third quarter of the year, resulting in the annual rate of change improving from -1.2% to 2.2%. Aberdeenshire and Moray was the best performing area, with prices up 7% on the previous year. Southern Scotland, that is Ayrshire, the Borders and Dumfries and Galloway, was again the worst performing area, with a 2% year on year fall.
Prices in Wales increased by 2.6% in the third quarter on a seasonally adjusted basis, and were up 3.6% compared with the previous year. Parts of South Wales, including Bridgend, Neath, Port Talbot and Swansea, saw prices up 4% year on year but Mid and West Wales was the least expensive area with a 2% year on year decline.
