by Peter Jacobs
The latest price change index published by the Nationwide Building Society say that the average house price in the UK has increased by 0.1% in June 2010. This very small change is welcomed although the rate of growth has certainly eased from recent months. This was much lower than the increase for June 2009 so the annual rate of house price inflation has fallen to 8.7% from 9.8% in May and the average UK home now costs £170,111 according to the survey which is still a better return than if you put your money in a bank savings account !. With the continued uncertainty in the economy and the recent emergency budget the housing market is thought to be subdued over the coming months.
Stable house prices forecast to continue
One thing that may help it recover is the recent abolition of the home information packs announced just after the new coalition government came to power. This will mean that the overall housing stock for sale should increase and with this increase in demand may mean stable or the lowering of housing prices for the coming months and perhaps into next year.
This week also saw a report from the Bank of England saying that mortgage approvals were flat for May at 49,815 which was almost the same as April which was 49,828 and at these levels they are around 50% lower than 4 years ago in the housing boom before the banking crisis hit and the recession took hold.
Overall remortgaging are still at historic lower levels because many people are sticking to the very low standard variable rates that they have moved onto once their fixed rate or tracker rate mortgages have lapsed. At these levels there is no requirement to move a mortgage unless people need to move or take equity out of their property (but if they do, the current new mortgage products are at much higher levels and require a new mortgage fee to complete them).
The Nationwide data shows that the average house price rose from 2000 up to the peak in mid 2007 then dropped until the end of 2008 then the prices started to climb and although house prices for the UK are not back to the peak they are not much behind although the annual percentage gain is starting the trickle down.
The housing market is still fragile and may continue in this form for years to come with uncertainty surrounding the economy and the cuts in government departmental spending yet to feel their real force. Unemployment although stable is still high and is likely to rise in the coming months before seeing a decline perhaps in 2011.
Budget changes not thought to affect supply
The tax changed for capital gains tax is thought not to affect the housing market as much as first thought. Many commentators believed there would be an increase from the previous 18% to 40% but the increase was just to 28% and was from immediate effect. If there was a delay, perhaps to the end of the year, it was believed that many buy to let investors would flood the market with their properties in an attempt to sell them before the deadlines, but as the change has now come into force this is not likely to occur.
The Nationwide predict that overall yearly house price inflation will continue to drift downwards because of the higher increases last year which are not present in this years numbers.
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