House prices rise in October but could drop next year, says ONS

UK house prices grew 0.1% in the year to October, recovering slightly after the fall in the wake of the Brexit vote.

According to the Office for National Statistics, the UK house price index grew 6.9% year-on-year in October, rising just 0.1% from the 7% growth in the year to September.

This followed a 0.4% rise month-on-month in September and a 0.4% drop in August.

The average house price in the UK in October was £216,674, down slightly from £216,545 the previous month and £202,663 in October 2015.

The Bank of England’s agents’ summary of business conditions for September and October found the housing market had recovered since the weakness seen in the aftermath of the EU referendum in June.

However, Howard Archer, chief European and UK economist at IHS Markit, said that he expects house prices to come under pressure next year, in a large part due to weak consumer confidence.

“With housing market activity coming off its recent lows and the economy currently resilient, house prices look likely to rise modestly in the near term. However, we suspect that house prices will come under increasing pressure as 2017 progresses and will likely be essentially flat over the year. Indeed, we would not rule out a marginal drop.

“We believe the fundamentals for house buyers will progressively deteriorate during 2017 with consumers’ purchasing power weakening markedly and the labour market likely softening. Additionally, housing market activity is likely to be limited in 2017 by weaker consumer confidence and willingness to engage in major transactions.”

Market research firm GfK reported that consumer confidence weakened in November due to concerns over the economy and inflation, while the major purchases index softened.

The main contribution from the increase in house prices came from England which saw an 7.4% gain in the year to October, with an average price of £233,000.

In Scotland, house prices rose 4%, with an average price of £143,000 and in Wales growth was up 4.4% with an average house costing £147,000. Meanwhile, in Northern Ireland, the average price stands at £124,000.

In London, house prices surged 7.7% year-on year with the capital being the most expensive area for homes with an average of £474,000.

London was followed by the south east with an average house price of £313,000 and the lowest region in England in the north east with an average of price of £125,000.