Caution urged over Nationwide price rise

Industry pundits last week cautioned paying too much attention to Nationwide’s August house price index which saw a 1.3 per cent increase in the price of the average home.

This was the highest increase in a single month since January 2010 and also saw the annual fall in house prices reduce significantly from 2.6 per cent in July to 0.7 per cent in August.

The cost of an average property, according to Nationwide’s index, now stands at £164,729, up from £164, 389 in July.

But estate agent’s director Russell Quirk argues that with prices jumping around from one month to the next September could just as likely see a reverse.

He says: “The slowdown in the annual pace of decline is one positive if you are a glass half-full kind of person.”

Nationwide own chief economist Robert Gardner also warned against taking too much stock by the monthly rise.

Given the difficult economic backdrop, he says the extent of the rebound in August is a little surprising and advises against reading too much into one month’s data.

He says: “Especially since monthly price changes have been impacted by a number of one-off factors this year, such as the ending of the stamp duty holiday for first-time buyers.

“Nevertheless, the fact that the annual pace of house price decline moderated to -0.7 per cent in August from -2.6 per cent the previous month provides evidence that conditions remain fairly stable.

“This may be explained by the surprising resilience evident in the UK labour market, with further increases in employment in recent months, even though the UK economy has remained in recession.”

Legal & General Mortgage Club managing director Ben Thompson says the price increase could serve as a gentle nudge to those currently renting who feel no urgency to buy at the moment.

He says: “With renting on a national basis now more expensive than buying, we would ordinarily expect some tenants to now look to buy. Consumer confidence does though remain low and real first-time buyer mortgages are harder to get than they used to be, so we are not yet into a normal recovery phase.”