Analysis and information on the changes in house prices from the Nationwide and Halifax price monitors
House Prices keep on Rising!
It appears that new figures are showing that house prices grew faster in May this year than at any time in the past six years.
The number of mortgages on the market has increased sharply since the Government launched a scheme called Funding for Lending last August, which has given lenders access to cheap finance to help borrowers.
Over the last few months most lenders have been slashing their rates and they have also reported increased numbers of first time buyers entering the market.
Properties are also selling quicker with sellers achieving prices closer to their asking prices. The average time on the market fell back to 8.8 weeks, which is at its lowest level since July 2010. The percentage of asking price achieved is just under 94 per cent, the highest level since July 2010.
According to Nationwide building society’s latest house index house prices are rising at the fastest annual pace for 18 months.
Average property prices rose 0.4 per cent in May and are 1.1 per cent higher than a year ago, the biggest annual rise since November 2011.
Also according to Hometrack, the property analytics business, house prices rose 0.4 per cent last month, which is the most since May 2007
The latest signs of life come amid worries over a house prices boom as the supply of new homes fails to keep up with the increased demand.
David Newnes director of property group LSL, has recently warned that “the boost to house prices provided by more activity could be problematic as it made homes less affordable to new buyers”.
Matthew Pointon, property economist at Capital Economics, said he believed much of the optimism about a housing market recovery “is misplaced”.
Some industry experts believe that the rise in housing market optimism could help prices to make further gains over the coming year, but confidence is fragile and it could easily evaporate.
It seems that the house price increase comes at a time when the new ‘Help To Buy’ scheme was unveiled in the March Budget.
Amid the recent unveiling of this new government backed scheme a number of experts have warned it will drive up house prices to artificial levels.
Many critics, including the outgoing Bank of England governor Sir Mervyn King, the Royal Institution of Chartered Surveyors (RICS), the Organisation for Economic Co-operation and Development (OECD), and various other campaigns for affordable housing, have warned that the Help To Buy scheme risks fuelling a new housing boom.
Duncan Stott, a spokesperson for the first time buyer campagin Priced Out, also added “Pumping more money into a housing market with chronic undersupply has one surefire outcome and that is pushing up house prices.”.
However all this said, a recent study by the Organisation for Economic Co-operation and Development (OECD), which compared prices with local wages and rents, suggests British house prices are 31 per cent too high compared to rents and 21 per cent over-priced against incomes.
Are House Prices all They Seem to be?
It is encouraging to see that the housing market now appears to be picking up across most parts of the UK, despite ongoing concerns about the wider economy. This may in part be due to the ever growing availability of cheap mortgage finance through schemes such as the funding for lending scheme.
Miles Shipside, director and housing market analyst at Rightmove, the property website, said “buyers have had their appetite whetted by government initiatives”.
It seems then that as potential house buyers take advantage of the record low interest rates and also the falling mortgage rates, property transactions in the UK have reached their highest levels in two and half years.
Grainne Gilmore, head of UK residential research at Knight Frank estate agents, states “some five years after the start of the financial crisis, the housing sector in the UK still does not bear the hallmarks of a fully functioning market”.
The Royal Institution of Chartered Surveyors (RICS) have revealed that many surveyors are ‘cautiously optimistic that this recent trend will continue.
Therefore, some experts feel that the current affordability within mortgage finance maybe masking a problem such as the fact that it appears some properties are becoming overvalued.
Property experts have suggested that UK house prices are probably overvalued by around 25 per cent.
David Blanchflower, a former member of the bank of England monetary policy committee, adds “nominal house prices will have to fall by a further 15 per cent to reflect their true market value”.
House prices have risen by 6.9 per cent so far this year. Data from property website Rightmove, shows new sellers asking prices in April 2013 are on average 2.1 per cent higher than March 2013.
It appears that this quick increase in prices is being fueled by positive market sentiment and also a lack of new property coming on to the market. As recent figures show that the number of newly marketed properties is down 4 per cent compared to the same time last year.
The fact is that ever since the financial crisis began, government and bank of England policy have been directed at primarily propping up house prices. This is despite the fact that a housing ‘bubble’ was a key part of the problem in the first place.
It seems then that it is all about winning votes, the chancellor George Osborne, knows that if he is to have any chance of keeping his job, house prices have to at least stay stable.
Meaning that some economists believe that house prices in Britain are therefore artificially high at the moment.
Some industry experts stated that prices actually falling would be the most effective way to get first time buyers on to the property ladder.
George Buckley, of Deutsche Bank, said “if interest rates were ever to return to ‘normal’, we would soon realise how overvalued the housing market actually is”.
All in all it looks like due to the lack of housing supply and the government intiatives overvalued housing will prevail for some time.
April House Prices.
It seems that several housing market studies have reported improvements in the housing market in recent months following the launch of the governments funding for lending scheme.
House price have mounted a partial recovery since the 2007 and 2008 property crash, but it appears that the South East and London have drove many of the improvements.
The Council of Mortgage Lenders (CML) indicated that the number of first time buyers in the first 2 months of this year was at its highest level in 5 years.
Official figures recently revealed that European house prices fell in the fourth quarter of 2012, however it appears that Britain bucked this trend as property values rose. Britain went against the trend showing a 2.3 per cent jump in property prices.
According to Rightmove, the leading property website, house sellers have raised their average asking prices by 2.1 per cent, thus setting a new record for this time of the year. Prices have risen by around £15,717 since the start of the year and are therefore just £1,500 behind June 2012’s record high.
Analysis of house prices show that the biggest jump in house prices was in East Anglia, where the typical asking figure jumped 4.4 per cent.
Even more recent figures have revealed that house prices have hit an April high, fuelling expectations of a property market revival.
It also seems that the gap between home owners asking prices and actual selling prices has also narrowed, this may be due in part to the fact that many buyers find it easier to obtain loans.
Peter Spencer, chief economic adviser to the Ernst and Young Item Club, said “ real incomes are already starting to recover, mortgages are becoming more readily available and homes are more affordable as the house price to earnings ratio continue to fall”.
Current data from mortgage lender Halifax put the latest price to wages ratio for the UK at 4.51, which is down from a peak of 5.83 recorded in the summer of 2007.
Miles Shipside, director of Rightmove, suggests “with London prices pausing for breath this month but likely to bounce back, May looks like an odds on bet to deliver a new asking price record”.
According to current data more than a million people are expected to move house this year.
Therefore the influential Ernst and Young Item Club forecast that Britain’s property market is a “win win” scenario in 2013.
Many estate agents have also reported more activity in more segments of the property market. Although figures have shown that the run of houses coming on to the market in April was 4 per cent down on just a year ago.
However some analysts have warned that many of these figures appear too optimistic.
Ed Stansfield, chief property economist at Capital Economics, adds “the underlying reality is that outside of London, the UK market is still extremely flat and large parts of the market are seeing steady downward drifts”.
House Prices Rise for First Time Buyers.
It appears that recently several housing market studies have been reporting improvements in the housing market in recent months following the launch of the governments funding for lending scheme.
Industry figures have shown that around 216,200 first time buyers bought their first home in 2012 which was more than there has been since the peak of the property boom back in 2007. Read more
March 2013 House Prices.
The finance Ministry and the bank of England have announced several measures since last to try to boost the housing sector.
Therefore some experts feel with the funding for lending scheme appearing to have had an impact on the mortgage market and also with the help to buy scheme on the horizon, there may be a degree of expectation in the market. But these experts are worried that sellers may therefore become over confident and thus overestimate the value of their home. Read more
Negative Equity in 2013.
The national average house price fell by around 20 per cent between late 2007 and 2009.
Nearly six years on from the housing market crash and it seems that most property is worth substantially less.
House prices falls can leave home owners who hold mortgages with little or no equity in their properties. This can then leave borrowers with unsustainable burdens of debt, meaning that they are unable to move and also it restricts their options to remortgage on to a better rate.
With house prices stalling over the last two years, home owners have been unable to build up equity to fund their next move.
Nitesh Patel, housing economist at Lloyds banking group, said “house prices have been falling or flat for the past four years and as a result many are still in a very low equity position”.
Recent data has shown that since 2007 those most exposed to negative equity are borrowers who obtained high value mortgages that were commonplace before t he credit crunch, as they are the most at risk from declines in property prices.
Negative equity occurs when the value of a property used to secure a loan is less than the outstanding balance of the mortgage.
Therefore negative equity creates a major problem for home owners as they can not sell their home with out owing large sums to their lenders.
The Financial Conduct Authority (FCA) estimates that as many as 630,000 families in Britain could be in negative equity.
Although the Council of Mortgage Lenders (CML) recently estimate the figure to be around 800,000 home owners.
Lloyds TS’s third annual second stepper report revealed that around 61 per cent of those home owners who wanted to move up the property ladder in 2012 were unable to do so due to their property being in negative equity.
These figures however are less severe than those recorded after the property crash of the early 1990s when negative equity peaked at 1.6 million households.
However, Martin Wheatley, chief executive of the Financial Conduct Authority (FCA), suggests that “when interest rates rise, it may become much more of a problem”.
Campbell Robb, chief executive of the housing and homelessness charity, Shelter, says “the impacts of negative equity can be devastating. The past few years have left many people in very difficult circumstances they would never have foreseen”.
Many home owners in negative equity feel that they have been left to fight for themselves in a difficult property market as it seems that government initiatives have so far just been focused on first time buyers.
Other home owners have said that they believe that it is now actually harder to move up the ladder than to get on it in the first place.
Miles Shipside, director of Rightmove, the property website, said “ second steppers are the ugly duckling of the housing market. Overlooked for government incentives and struggling to protect their equity if they bought near the peak”.
Nick Pearce, director of the Institute of Public Policy Research, a think tank, added “rather than further pumping up house prices and exposing more people to the possibility of negative equity if prices do, in time fall, politicians need to set out boulder steps that would really get Britain building”.
Many Homes Sell at a Loss.
For most home owners, when they sell their home is entirely up to them. For instance if they have a growing family they can still put up with the same home for awhile or if they need to move for work they could choose to rent out their home and rent another one until prices pick up.
So it would seem that there is no reason home owners would choose to sell up if it meant do so at a loss, nobody likes to make any kind of loss especially on such a major purchase like a home. Read more
House Prices in February 2013.
At the moment it seems that British households have little room to make ‘big ticket’ purchases such as property.
However, low mortgage rates and the bank of England’s funding for lending scheme appears to be slowly supporting the UK housing market recovery. Read more
House Prices in 2013.
House prices have been flat or modestly declining across the UK since 2010, therefore house prices have remained little changed over the course of 2012.
Overall last year saw an even mix of monthly rises and falls as prices continued to lack any real direction. Read more
House prices in August rise!
Many sellers slashed their prices in order to tempt scarce summer buyers and therefore house prices in England and Wales fell an average of 2.4 per in August, according to property website, rightmove.co.uk.
It seems that this is the largest price drop ever recorded in August and brings the average house price to £236,260. Read more