The headline figure masked considerable regional variation, with property values in London falling for the fifth quarter in a row, according to Nationwide.
House prices edged ahead by just £177 in September as the UK continued to experience a two-speed property market.
The average cost of a home rose by 0.3%, following August’s 0.5% fall, to stand at £214,922, according to Nationwide.
The annual rate at which property values are rising remained unchanged from the previous month at 2%.
But the headline figure masked considerable regional variation, with house prices in Yorkshire and Humberside jumping by 5.8% in the past year, while property values in London fell for the fifth quarter in a row.
Robert Gardner, Nationwide’s chief economist, said: “For the sixth successive quarter, price growth in northern England exceeded that in southern England.”
Why is this happening?
On a national level, demand from potential buyers remained subdued due to uncertainty over Brexit and the direction of the wider economy, as well as stretched affordability in some areas.
But this lack of demand was balanced by a shortage of homes for sale, offering support to prices.
On a regional level, areas with the highest property values, such as London and the outer metropolitan area, saw either house price falls or very subdued rises.
However, regions with lower property values, where affordability is less stretched, continued to see stronger gains.
The exception to this trend was the north, where property values fell by 1.7% year-on-year in the third quarter.
Above: Four-bedroom terraced house for sale on Moss Terrace, Northwich
Tell me more about the regional picture
While Yorkshire and Humberside posted the strongest annual gains between July and September, prices were also at least 4% higher than they had been a year earlier in the East Midlands, Northern Ireland, West Midlands and the north west.
At the other end of the spectrum, property values were 1.7% lower year-on-year in the north, while they were down by 0.7% and 0.3% in London and the outer metropolitan area respectively. The south east also recorded subdued gains of just 0.8%.
Property remains most expensive in London at an average of £468,544, while it is cheapest in the north, where the typical home costs just £125,085.
What’s the background?
Going forward, Nationwide said the direction of the property market would depend on how the broader economy evolved, particularly in terms of the labour market and interest rates.
Gardner said: “Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low.”
Annual house price growth had been stuck in the 2% to 3% range for the past 12 months.
Nationwide expects property values to end 2018 only 1% higher than they started it, suggesting growth will slow further in the final quarter of the year.
Top 3 takeaways
- House prices edged ahead by just £177 in September
- The annual rate at which property values are rising remained unchanged from the previous month at 2%
- The headline figure masked considerable regional variation
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