The Nationwide House Price Index for the month revealed that this was compared to a 2.4% annual rise recorded in August. On a monthly basis, house prices increased by 0.7%, improving on the 0.2% fall recorded from July to August.
Robert Gardner, Nationwide’s chief economist, said average house prices were now around “2% below the all-time highs recorded in summer 2022”.
He added: “Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters.
“These trends have helped to improve affordability for prospective buyers and underpinned a modest increase in activity and house prices, though both remain subdued by historic standards.”
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October Budget to affect the healthy autumn market?
Industry commentators said Nationwide’s data suggested the property market was headed for a healthy autumn period, however, doubts were expressed about the impact of any policy changes announced in the upcoming Budget.
Mark Harris, chief executive of SPF Private Clients, said: “Competition among lenders to offer cheaper mortgage rates is boosting housing market activity and property prices.
“Many buyers were waiting for rates to come down before taking action and now that the Bank of England has made that all-important first cut, with another expected in November, this will further encourage those who may be wavering.
“The housing market appears to be on a firmer footing with buyer and seller confidence noticeably stronger.”
Nicky Stevenson, managing director of national estate agent group Fine and Country, said the rise in house prices was a “positive sign that the economy is stabilising”.
Stevenson added: “As we head into autumn, we expect the market to gain even more momentum, driven by lower interest rates, steady inflation, and an uptick in buyer demand.
“However, the upcoming October budget introduces new uncertainties, particularly with rumours of a potential increase to capital gains tax. This may prompt some investors and people with a second home to act quickly to finalise purchases before any tax hikes take effect.”
Stevenson said: “While the recent rise in house prices suggests a resilient market, recovery remains fragile. On the positive side, the combination of stabilising inflation and easing mortgage rates offers a more favourable environment for first-time buyers and those looking to move.”
Matt Thompson, head of sales at Chestertons, suggested people were already making decisions based on possible tax changes.
He said: “In response to the uplift in buyer activity, and with looming changes to capital gains tax in the upcoming Autumn Budget, we have also seen more sellers putting their property up for sale.
“We expect September’s level of market activity to continue in October but sellers will review their position following the Autumn Budget whilst some buyers await the next Bank of England announcement on interest rates in November.”
Strongest growth in Northern Ireland
Nationwide collects regional house price data on a quarterly basis, and found the steepest rate of growth was recorded in Northern Ireland where prices rose by 8.6% year-on-year to £196,197 in Q3. This was a rise of 4.1% since Q2.
This was followed by the North West with a 5% annual uptick to £215,807, and a 4.1% quarterly rise.
East Anglia was the only region to record a decline in house prices since last year, with a 0.8% fall to £270,906. On a quarterly basis, prices dropped by 1.8%.
With 2% growth since the same period last year, London was the most expensive region with an average house price of £524,685. The North was the cheapest, with an annual rise of 3.2% to £161,066.
Terraced houses rising in value
Nationwide said its data showed the “biggest percentage rise” in the price of terraced houses with a 3.5% increase.
Gardner said: “Semi-detached and flats saw increases of 2.8% and 2.7% respectively. Whilst detached houses saw more modest growth of 1.7%.
“If we look over the longer term, however, detached homes have continued to have a slight edge over other property types, most likely due to the ‘race for space’ seen during the pandemic. Indeed, since Q1 2020, the price of an average detached property increased by nearly 26%, while flats have only risen by around 15% over the same period.”
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: September house prices near record highs of 2022 – Nationwide