House price growth edges up in August
UK house prices edged up by 0.8% in August, marking the sixteenth successive monthly price rise, according to the Nationwide House Price Index. As a result, the annual pace of house price growth is up to 11% from 10.6% in July.
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said: “While this is still below the 11.8% recorded in June, house price growth continues to outpace earnings by a wide margin, with average wage growth running at less than 1% in recent months.
“Nevertheless, at a national level housing affordability does not appear stretched by historic standards, in part due to the low level of mortgage rates. The cost of servicing a typical mortgage remains close to the long run average as a share of take home pay.
“The outlook for the housing market remains highly uncertain. The number of mortgage approvals fell by almost 20% between January and May, suggesting that activity was cooling. However, there was a modest rebound in June and it is unclear how much of the slowdown was due to the introduction of Mortgage Market Review rather than an underlying loss of momentum.
“Surveyors report that new buyer enquiries have moderated somewhat in recent months, and the prospect of interest rate increases together with subdued wage growth may temper demand in the quarters ahead.
“However, the brightening economic outlook is likely to provide ongoing support for housing demand. Consumer sentiment remains buoyant thanks to declining inflation and sustained increases in employment.
“Similarly, the first increase in interest rates still appears some way off - we expect the first increase in the first quarter of 2015. Guidance from the Bank of England suggests that the increase in interest rates is likely to be gradual, and they are expected to settle at a level somewhat below the average prevailing before the financial crisis.
“Moreover, the supply side of the market remains constrained, which will continue to provide underlying support for prices.
Impact of good transport links on house prices clearly evident in major UK cities
“There are a wide range of factors that determine property values, from the physical characteristics of the property itself, such as the number of bedrooms, bathrooms and floor area, to the type of neighbourhood in which the house is located.
“We recently examined how the proximity to a tube or railway station impacted property prices in three major cities (London, Manchester and Glasgow) after taking account of other property characteristics, such as property type, size and local neighbourhood type. Our research suggests that people are willing to pay a significant premium to be close to a station.
“The impact is most marked in London, where being located 500m from a station attracts a 10.5% price premium over an otherwise identical property 1,500m from a station. This is equivalent to approximately £42,000 based on the value of the typical London home. In Manchester, the premium on a typical property for being 500m from station is 4.6% (£12,000), while in Glasgow the premium is 6% (£9,400).
“London homebuyers’ willingness to pay a greater premium for being close to a station compared with those in Greater Manchester and Glasgow probably reflects the greater reliance on public transport in the capital, with residents less likely to drive.
“London also has the densest network of stations and services, with 94% of properties within 1.5km of a station, compared with 72% in Greater Glasgow and 69% in Greater Manchester.”