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UK Home Prices Rise by Most Since March 2022, Lender Says - BLOOMBERG
(Bloomberg) -- UK house prices rose by the most since March 2022, according to one of the country’s largest mortgage lenders, as rising real incomes and historically low unemployment continued to support buyers’ return to the market.
Nationwide Building Society said the average home price rose 1.2% to £268,144 ($340,000) in November, accelerating from last month’s 0.1% rise. Economists were expecting a 0.2% increase. It left prices 3.7% higher than a year ago.
“Solid labor market conditions, with low levels of unemployment and strong income gains, even after taking account of inflation, have helped underpin a steady rise in activity and house prices since the start of the year,” said Robert Gardner, chief economist at Nationwide. “Household balance sheets are also in good shape with debt levels at their lowest levels relative to household income since the mid-2000s.”
The arrival of Labour’s budget on Oct. 30 has also helped end uncertainty that had given some buyers pause. Households were largely spared from the £40 billion of tax increases included in Chancellor of the Exchequer Rachel Reeves’ fiscal plans.
Meanwhile, the Bank of England cut interest rates for a second time this year early in November. The quarter-point reduction to 4.75% brought immediate relief to those on adjustable-rate mortgages that move in line with the BOE benchmark. Fixed rates edged higher during the month as the BOE signaled it was in no hurry to ease again, though they remain well below levels seen over the summer.
What Bloomberg Economics Says...
“UK house prices jumped in November as greater clarity following the Autumn Budget and the quarter-point rate cut from the Bank of England brought back buyers who had been waiting on the sidelines.”
—Niraj Shah, economist. Click to read the REACT on the Terminal
The UK’s resilient jobs market has helped fuel the rise in activity. Workers are enjoying wage growth of almost 5%, above the rate of inflation, while unemployment remains low after companies held on to staff in the face of labor shortages despite feeble demand, according to the latest jobs market figures.
Further BOE interest rate cuts would improve affordability, which remains stretched by historic standards. That’s likely to come at a more cautious pace as rate-setters are unsure how businesses will respond to Labour’s increase in employer taxes.
Still, housing activity is likely to accelerate in the first months of next year when prospective homeowners start rushing to avoid an increase in stamp duty in April. Last week, BOE data showed that mortgage approvals climbed to their highest in over two years in October.
“Providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually,” Gardner said.
(Adds chart, context on interest rates)
