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House prices in the UK have continued to defy expectations of a slump by rising more than expected in February, according to a monthly index compiled by Nationwide.
Prices were up 0.6 per cent in February compared to the previous month, ahead of analyst expectations of a 0.2 per cent rise. That is a stronger growth rate than January’s 0.2 per cent increase – which was also better than expected – and marks the third consecutive month of house price gains after a 0.8 per cent rise in December.
On a year-on-year measure, house prices were up 4.5 per cent in February compared to the same month in 2016 – also ahead of expectations of a 4.1 per cent rise and ahead of January’s annual 4.3 per cent gain.
The average price of a home in the UK is now £205,846, according to the figures.
Robert Gardner, Nationwide’s chief economist, said:
Recent data suggests that the UK economy has continued to perform relatively strongly. The economy accelerated slightly in Q4, expanding by a healthy 0.7% quarter-on-quarter, and the unemployment rate remained stable at an 11-year low of 4.8%.
The outlook is uncertain, but we, along with most other forecasters, expect the UK economy to slow through 2017 as heightened uncertainty weighs on business investment and hiring. Consumer spending, a key engine of growth in recent quarters, is also likely to be impacted by rising inflation in the months ahead as a result of the weaker pound.
Nevertheless, in our view a small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support prices.
Commenting on the figures, Howard Archer, chief economist at IHS Markit, said:
February’s solid looking rise in house prices reported by the Nationwide does not change our view that housing market activity and prices will come under increasing pressure over the coming months from deteriorating consumer fundamentals and weaker confidence.
Consequently, we suspect that house price gains over 2017 will be no more than 3%.