5th November 2015
Property prices enjoyed a decent 1.1% month-on-month rise in October, taking the annual rate of inflation up to 9.7% according to The Halifax.
House price growth is on the up again as the latest tally is up from 8.6% in September
Looking at the latest figures, Martin Ellis, Halifax housing economist, said: ”Improving economic conditions and household finances, together with sustained low mortgage rates, have boosted housing demand during 2015. Strengthening demand is filtering through in to higher sales levels although the ongoing shortage of supply is acting as a significant constraint on activity.
“The imbalance between supply and demand is likely to persist over the coming months, maintaining upward pressure on house prices.”
However The Halifax data has been more volatile than other house price measures in recent months and much stronger overall than most.
Howard Archer, chief UK and European economist at IHS Insight said: “At 9.7% in the three months to October, annual house price inflation on the Halifax measure was nearly two-and-a-half times the Nationwide’s annual house price inflation of 3.9% in October.
“This highlights the need to not pin too much weight on one particular house price survey or measure, but to try and take an overall view from the data.”
Nevertheless Archer anticipates that house prices will “see solid increases over the coming months” amid firm buyer interest and a shortage of properties.
Overall market activity seems likely to be supported by largely helpful fundamentals, notably including stronger earnings growth, high employment, elevated consumer confidence and still very low mortgage interest rates.
“Taking an overview of the various surveys, we expect house prices to rise by around 6-7% in 2016. The shortage of properties poses a significant upside risks to these forecasts,” added Archer.
However house price appreciation is also expected to be constrained by more stretched price to earnings ratios, tighter credit checks and the strong likelihood that interest rates will start rising gradually during 2016.
According to the Halifax, the house price to earnings ratio reached a seven-and-a-half year high of 5.35% in August and remained close to this at 5.31% in October, well above the long-term average of 4.13%.