UK Nationwide House Prices Rise More Than Forecast

(RTTNews) - UK house prices logged a faster-than-expected growth in November despite budget uncertainty, data from the Nationwide Building Society showed Tuesday.

House prices grew 1.8 percent on a yearly basis in November, slower than the 2.4 percent increase seen in October. Nonetheless, the annual growth was faster than the forecast of 1.4 percent.

Month-on-month, house prices were up 0.3 percent, slightly faster than October's 0.2 percent increase. Prices were forecast to remain flat in November.

"The housing market has remained fairly stable in recent months, with house prices rising at a modest pace and the number of mortgages approved for house purchase maintained at similar levels to those prevailing before the pandemic," Nationwide's Chief Economist Robert Gardner said.

Amid subdued consumer confidence and signs of weakening in the labor market, the current performance suggests resilience, especially since mortgage rates are more than double the level they were before Covid struck and house prices are close to all-time highs, Gardner added.

Further, he observed that the changes to property taxes announced in the Budget are unlikely to have a significant impact on the housing market.

The high value council tax surcharge, which is not being introduced until April 2028, will apply to less than 1 percent of properties in England and around 3 percent in London, he noted.

However, the increase in taxes on income from properties may weigh on the supply of new rental properties coming onto the market. As a result, there is a potential for upward pressure on rental growth, Gardner said.

"Looking forward, housing affordability is likely to improve modestly if income growth continues to outpace house price growth as we expect," said Gardner. Borrowing costs are also likely to moderate a little further if the interest rate is lowered again in the coming quarters.

Lower interest rate and improving affordability will support buyer demand, especially since household balance sheets are strong. The ratio of household debt to disposable income is at its lowest for two decades, he noted.