Commenting on the figures Martin Gahbauer, Nationwide's Chief Economist, said:
“The recent upward momentum in house prices has continued into September, with the price of a typical
house increasing by 0.9% on a seasonally adjusted basis. The 3 month on 3 month rate of change –
generally a smoother indicator of the near term trend – rose from 3.3% in August to 3.8% in September,
the highest level since August 2004. At £161,816, the average price of a typical UK property was
essentially unchanged from a year earlier, representing the first time since March 2008 that the year-onyear
rate of change has not been negative. Over the first nine months of 2009, the seasonally adjusted
index of house prices has risen by 4.1%, though relative to the October 2007 peak it is still down by
13.5%.
“The further increase in house prices is very much consistent with improvements in a broad range of
economic and financial indicators over the last few months, all of which suggest that the most intense
phase of the recession and financial crisis has probably passed. However, given that the housing market
still faces considerable headwinds in the form of high unemployment, restrictive credit conditions and an
impending withdrawal of the stamp duty holiday, it would be surprising to see house prices continuing to
increase at the very strong rate seen in recent months.
Rents still subdued even as house prices rise
“One of the key questions facing the outlook for house prices is whether the supply of homes available for
sale will remain at current lows. To shed light on this question, trends in the rental market are worth
watching particularly closely at the current juncture. The downturn in housing turnover over the last two
years has prompted many home movers to let their old properties out rather than sell. The option to let
has enabled many to move home even without being able to sell their old properties at the desired price.
The rationale behind the letting option is to use the rental income from the tenancy toward maintenance
of the old property, until such time as the housing market recovers to a point where a sale at something
closer to the desired price is possible. Such an approach is most viable for outright owners or those with
only small mortgages, as the rental income would in all likelihood cover the cost of running the property
plus any mortgage repayments.
