House prices in the UK saw a slight pick-up in growth last month, rising 0.2pc between September and October, according to Nationwide.
Annually, price growth edged up to 2.5pc from 2.3pc in September, taking the average property price in Britain to £211,085 and exceeding economists’ predictions of 2.2pc.
Nevertheless, the outlook for the housing market remained subdued, and it is far lower than last October’s rate of 4.6pc. While low mortgage rates and healthy employment are providing some support for demand, pressure on household incomes and falling real wages is weighing on confidence, Nationwide said.
The house price to earnings ratio, at 7.2 times, is almost at a record high.
Demand for property could take a further hit this week if the Monetary Policy Committee at the Bank of England increases the Bank Rate for the first time in 10 years. Even a marginal 0.25pc rate hike could put off potential first-time buyers, although some experts insist that a rate rise is unlikely to stifle growth.
Nationwide said that if rates increased from 0.25pc to 0.5pc, the effect would be smaller than in the past because more homeowners are on fixed-rate mortgages.
Samuel Tombs at Pantheon Macroeconomics said that the market is “resilient for now, but headwinds are building”, pointing to the fact that this index is based on mortgage offers for people who most likely started buying their home before the MPC warned in mid-September that interest rates would rise soon.
The Royal Institution of Chartered Surveyors reported that during that month, new buyer enquiries fell sharply.
This resilience in prices has been due to low borrowing costs and strong employment, as well as a continued lack of homes for sale: the Royal Institution of Chartered Surveyors has said that stock per estate agent branch is hovering at record lows.
Alex Gosling, chief executive of online estate agents HouseSimple, said that this was a “housing market which feels flat and in need of a spark”.
Capital Economics has forecast that house prices will grow by 2pc next year, while JLL has said that the average UK property will rise in value by just 1pc.