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UK house prices increased more than expected in September as still-low unemployment and rising wages underpinned growth, lender Nationwide said on Thursday.
The group, whose monthly index provides the first indications of the health of the housing market, said house prices rose 0.5 per cent between August and September, taking the average cost to £271,995.
The annual rate edged up to 2.2 per cent in September, from 2.1 per cent the previous month.
Both figures were stronger than the 0.2 per cent month-on-month expansion forecast by economists polled by Reuters and the 1.8 per cent annual growth they expected.
The higher-than-forecast number defied expectations from economists that looming rising taxes in chancellor Rachel Reeves’ Budget next month would hit sentiment in the property market.
The chancellor signalled this week there would be big tax rises in the Budget as new official productivity forecasts were expected to blow a hole in her fiscal plans.
Transactions this year have been a little above the 2015-19 average, said Martin Beck, chief economist at WPI Strategy. “In short, the market has weathered higher interest rates, economic turbulence and shifting stamp duty rates better than many expected,” he said.
Nationwide said the growth was boosted by low unemployment, rising earnings, strong household balance sheets and market expectations that the Bank of England could further cut interest rates next year.
“Despite ongoing uncertainties in the global economy, underlying conditions for potential homebuyers in the UK remain supportive,” said Robert Gardner, Nationwide’s chief economist.
The joblessness rate is still historically low at 4.7 per cent, despite a decline in employee numbers, while regular wages rose 4.8 per cent in the three months to July.
“Providing the broader economic recovery is maintained, housing market activity is likely to strengthen gradually in the quarters ahead,” he added.
Elliott Jordan-Doak, economist at the consultancy Pantheon Macroeconomics, said he expected the Budget next month to “avoid implementing highly distortive taxes that cause the property market to collapse suddenly”.
Property price growth was uneven among property types, with the price of semi-detached properties rising 3.4 per cent in the three months to September, according to Nationwide.
Detached property prices rose 2.5 per cent but prices of flats declined 0.3 per cent, the index found.
Northern Ireland remained the strongest performer with growth of 9.6 per cent, while price growth was weakest in London and the south west of England, according to Nationwide. London prices were stagnant at an annual rate of 0.6 per cent, the lender said.
Separate data published by the Bank of England this week showed that mortgage approvals to July steadied at around pre-Covid levels, while quoted mortgage rates continued to decline.