House Prices are Stabilising in 2011

by Mark Johnston

Overall there has been little change in the level of house sales or the number of properties for sale since late 2010. These steady market conditions have helped stabilise house prices in 2011 following 2010 modest decline. Halifax housing economist, Martin Ellis has said: “house prices in the last three months were 0.5% higher than the previous three months. This was the first increase in prices for approximately 14 months”. 

The Halifax figures paint an optimistic picture of the property market it has recorded a 4.7% increase in average property prices. The Nationwide building society house price survey latest figures show that prices across the UK rose by 0.2% in July2011 to £169,731, just 0.4% lower than a year ago.

Chief economist at Swindon based Nationwide, Robert Gardner said: ”Sluggish demand for homes, combined with only a gradual rise in the supply of available properties, has helped to keep property prices relatively stable.” Both lenders reports however are based on their own mortgage approvals data.

The average UK house price some other figures show rose by 0.3% in July 2011 which was marginally higher than in December 2010 on a seasonally adjusted basis, although this is still 2.6% lower than a year earlier.

House prices rose for the third month in a row in July with the property market slowly steadying. Mortgage rates with those with a 25% deposit look good, while those with a 15% or 10% deposit the rates are slowly improving. If lenders are willing to let borrowers their tough lending criteria it could deliver buyers for whom property looks affordable if prices ease back.

First time buyers preparing to take the plunge into the property market should ensure they can take the hit of future interest rate rises and also the possibility of a fall in house prices. The property market may rise from here, but if things take a turn for the worst it may be that house prices fall by as much as 10% over the next 2 years.

While house prices are avoiding a downward spiral, actual transactions remain at a very low level. Research suggests that the current house price has come from extended low interest rates. Sustained low interest rates and a slow improving economy could help house prices in the face of pressure from weak earnings growth, relatively high inflation and higher taxes.

The lack of any increase in interest rates has prevented the bottom falling out of the property market. However it is clear that still many UK properties remain over valued although no one really benefits from a rapid adjustment to realistic prices. Therefore banks whose main form of collateral are homes, property prices not falling sharply allows them to restructure their balance sheets.

Some analysis suggests as the economic outlook brightens, labour market conditions strengthen and housing affordability becomes less stretched, so such demand for housing should improve.

In conclusion surveyors said that the property market however difficult to access for first time buyers and the only buyers who can really be considered seriously are those who have already sold their property, or have a mortgage agreement



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