UK house price growth picks up in October, Halifax reveals

UK house price growth accelerated in October, supported by low borrowing costs and a shortage of properties for sale, Halifax revealed on Monday.

Prices increased a seasonally adjusted 1.4% compared to a month ago to an average of £217,411. It followed a monthly 0.3% rise in September and exceeded estimates for a 0.2% gain.

However, compared to the same month a year ago, price growth slowed in October, rising 5.2% in October after increasing 5.8% in September. It marked the lowest yearly growth since July 2013 when prices edged up 4.6%.

“This expected slowdown appears to have been largely due to mounting affordability pressures, which have increasingly constrained housing demand,” said Martin Eillis, housing economist at Halifax.

“Whilst house price growth may ease further in the coming months, very low mortgage rates and a shortage of properties available for sale should help support price levels.”

In the three months to October, prices were 0.1% higher than the previous quarter, a slight improvement on the last month’s 0.1% fall. Halifax said the quarter-on-quarter change is a more reliable indicator of the underlying trend.

The past few months have seen house sales plateau since the increase in stamp duty on second home and buy to let purchases in April, Halifax noted.

Mortgage approvals have also steadied over the past three months. Approvals in the third quarter dropped 12% compared to the same period a year earlier, according Bank of England data.

“With housing market activity seemingly coming modestly off its recent lows and the economy currently resilient, house prices may well rise modestly in the near term,” said Howard Archer, chief UK and European economist at IHS Global Insight.

“However, we suspect that house prices will come under increasing pressure as 2017 progresses and may dip modestly over the year, possibly by around 3%.”

He added: “We also suspect that business and consumer uncertainty will heighten in 2017, particularly once the UK formally launches divorce proceedings from the EU by triggering Article 50 and difficult negotiations increasingly come to the forefront.”

Prime Minister Theresa May intends to trigger Article 50, which would kick off the formal Brexit process, by March 2017.