Property prices rose 2.4% in the year to August, the fastest annual rate of increase since late 2022, according to latest figures from Nationwide.
The building society said that the rate picked up from 2.1% in July. However, prices are still around 3% below the all-time high levels seen in the summer of 2022 immediately before the mini-Budget of September that year sent mortgage rates soaring.
Prices actually fell slightly during August, always a quiet month for the property market, leaving the national average cost of a home standing at £265,375. But the annual rate is the fastest since the 2.8% recorded in December 2022.
Nationwide’s chief economist Robert Gardner, said: “While house price growth and activity remain subdued by historic standards, they nevertheless present a picture of resilience in the context of the higher interest rate environment and where house prices remain high relative to average earnings, which makes raising a deposit more challenging.
“Providing the economy continues to recover steadily, as we expect, housing market activity is likely to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.”
Alice Haine, personal finance analyst at wealth managers Bestinvest by Evelyn Partners, said: “The UK’s residential property market appears to be in recovery mode following the turbulence of 2023 when high borrowing costs and low supply stifled activity and dampened prices.
“With more sub-4% mortgage rates now available and the prospect of more interest rate cuts this year, buyers are flooding back into the market as improving affordability levels raise the likelihood that people can net their desired home.
The Nationwide’s latest figures also showed how energy efficiency is playing an increasingly important role in pricing.
Its analysis suggests that a more energy efficient property, rated A or B, attracts a modest premium of 2.8% compared to a similar property rated ‘D’, the most common rating.
An F or G rated home is valued 4.2% lower than a similar D rated property.
According to Gardner “Our research suggests while energy efficiency impacts remain relatively modest, they have increased relative to pre-pandemic levels, with A/B properties now attracting a larger premium compared with 2019 and F/G properties seeing a larger discount.”
