House-buyers in England and Wales have shrugged-off August's rise in interest rates, according to the Financial Times (FT) house price index in an article by Chris Giles, FT Economics Editor, published by the FT on their website.
The seasonally-adjusted monthly rate of house price inflation accelerated in early autumn. After a strong spring, house prices levelled off at the beginning of the summer, but have bounced back to rise by 0.5% in September alone. This sharp increase raised the annual rate of house price inflation in September to 6.1% from 5.8% in August.
The trend in the FT house price index is identical to those of other indicators of the housing market, showing greater strength in recent months. The FT index, measuring the prices of every property sold in England and Wales, has been less volatile than many others. It currently shows a lower annual average price gain than both the Halifax and the Nationwide measures, which report house price inflation at 8% or above.
London's house prices grew by 9.5% in the year to August, the month with the most up-to-date regional figures. House price inflation in the other regions of England and Wales, except the East Midlands, was between 4 and 6%. In the East Midlands, it was lower at 2.7%.
Gary Styles, economics director of Acadametrics, the consultancy which compiles the FT index, said: "Monthly house price growth has strengthened further in September to 0.5% following a relatively weak period in June and July. This strong performance has been led by London and supported by the South East and South West. Low rates of housing turnover and poor new housing supply have continued to drive southern housing prices throughout this year. There remains a risk that the London market is slow to adapt to higher interest rates as localised supply shortages continue to dominate a generally low housing turnover market."
But he warned that the strength of the housing market, particularly in London was not necessarily a good reason for the Bank of England to raise interest rates in November, since many regions have experienced little or no house price growth in the past three months. The strong annual rises are a result of rapid price rises earlier in the year.
There are some indications that the housing market is currently even stronger than that shown by the FT house price index, as estate agents, in particular, report rapidly increasing prices. The Royal Institution of Chartered Surveyors reported on Thursday that the balance of agents reporting rising prices was twice as high as its long-run average. This was beginning to spark a flurry of gazumping, according to RICS.
