According to Halifax, annual growth reached 7.4 per cent reversing a three-month downward trend that saw yearly house price inflation fall from 9.6 per cent in May to 8.7 per cent in June, 7.6 per cent in July and 7.2 per cent in August.
Government figures on house price inflation recorded values growing at a much higher rate over the summer. In June, the Office of National Statistics recorded yearly growth at 13.2 per cent.
Wales and Scotland continued to record the strongest house price inflation of any UK region or nation, recording annual growth of 11.5 per cent and 8.3 per cent respectively. The average house price in Wales reached £194,286 in September, with Scotland recording an average house price of £188,525.
Russell Galley, managing director, Halifax, said: “While the end of the stamp duty holiday in England and a desire among homebuyers to close deals at speed may have played some part in these figures, it’s important to remember that most mortgages agreed in September would not have completed before the tax break expired. This shows that multiple factors have played a significant role in house price developments during the pandemic.”
One factor, said Galley, was the change in homebuyers’ preferences and lifestyle choices. The popularity of larger homes has pushed up prices at faster pace than smaller properties.
The price of flats has risen 6.1 per cent in a year, or £6,640, while detached properties have risen 8.8 per cent in value, costing a buyer an additional £41,000.
The rising pressures on the cost of living and threats of increasing taxes are expected to dampen demand in the coming months but the low cost of borrowing and improving labour prospects for those already in employment are expected to buoy the market.
Limited supply, said Galley, was the biggest factor underpinning the future of house prices. Estate agents have reported a continuing reduction in the number of houses for sale. The shortage is expected to underpin average prices, rather than the recent rate of price growth, into next year.
Andrew Wishart, property economist for Capital Economics, added: “Most mortgages approved in September will have been for purchases that will complete in October or November, so rather than a last-minute rush to secure stamp duty savings, the strength of the data suggests that we are right to expect that house prices will continue to rise after the tax break ends.”
On comparing the Halifax index with Nationwide’s report Wishart noted that while the building society’s measure showed only a small increase in prices in September, when analysing quarterly price growth, both indices show growth easing which he said could be attributed to the end of the stamp duty holiday.
“Nonetheless, the strong gain in the Halifax index in September suggests that we are right to expect house price growth to cool rather than collapse,” said Wishart. “Indeed, very limited [stock] suggests that strong competition between buyers for the limited number of homes for sale will support prices in Q4.”