UK house prices rise faster than forecast, Halifax data shows

UK house prices bounced higher in October after a fall the previous month, according to Halifax's index of home sales, rising more than analysts expected during the month.

The Halifax house price index showed a 1.1% increase on the same month in 2014, compared to the 0.6% expected, and after a 0.9% month-on-month fall in September.

Furthermore, house prices in the three months to October were 2.8% higher than in the previous three months of 2015 and 9.7% higher than in the three months to October 2014, again beating a 9.5% forecast, and after an 8.6% rise in the previous report.

Martin Ellis, Halifax's housing economist, said the 2.8% quarter-on-quarter rise was slightly above the average of 2.5% on this measure over the first nine months of the year.

“Improving economic conditions and household finances, together with sustained low mortgage rates, have boosted housing demand during 2015," he said.

"Strengthening demand is filtering through in to higher sales levels although the ongoing shortage of supply is acting as a significant constraint on activity."

He suggested the imbalance between supply and demand was likely to persist over the coming months, which would maintain upward pressure on house prices.

Other economists highlighted the difference between Halifax's data painting a more volatile picture than other house price measures in recent months.

Sam Tombs, chief UK economist at Pantheon Macroeconomics, said the rise shown in the Halifax data partly reflected "some catch-up [with other suverys] after years of relative weakness".

However he added that "momentum is clearly returning to the housing market as [...] Banks continue to seek to increase their mortgage loan books, and the Financial Policy Committee’s rules on loan-to-income multiples are still not close to biting."

IHS Global Insight's Howard Archer noted that the quarterly 9.7% increase in annual house price inflation was nearly two-and-a-half times the Nationwide’s annual house price inflation of 3.9% in October.

He himself expects house prices to see "solid increases over the coming months" amid firm buyer interest supported by decent fundamentals and a continuing shortage of properties for sale, as hit the results of estate agent Countrywide this week.

"Taking an overview of the various surveys, we expect house prices to rise by around 6-7% in 2016. The shortage of properties poses a significant upside risks to these forecasts," Archer added.