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News: House Prices Rise 0.9% In June, Says Nationwide

Tue, 30 Jun 09

House prices rose by 0.9% during June, according to the Nationwide building society’s latest house price survey.

This is the third rise in the past four months and means the three-month rate of change has turned positive for the first time since December 2007. The three month rate of change is now 0.9% compared to –0.4% in May.

Taking into account these latest figures the annual rate of decline is now 9.3%, the first time the year on year fall has been in single digits since July 2008. In May last year the annual rate of decline was 11.3%.

Martin Gahbauer, Nationwide’s chief economist, says that if this latest pattern is repeated across the year, 2009 could end with only a small single digit annual fall.

“This would represent a stark shift from trends seen at the turn of the year when most indicators were pointing to a repeat of the large declines seen in 2008.

“House prices have now risen in three of the last four months, suggesting that the improvement that began to show up in March represents more than just a statistical noise.”

He added that despite a low level of activity in the mortgage market, the lack of available housing stock had contributed to this stabilising in prices.

"Another factor that is vital to demand levels is housing affordability. Following the house price and interest rate declines of the last two years, initial mortgage affordability as a percentage of take-home pay is now slightly below its long-run average, suggesting that housing valuations have returned to a more normal level. Initial affordability, however, does not take into account the fact that interest rates may rise over the lifetime of a mortgage." warned Mr Gahbauer.

"With interest rates currently at unusually low levels, initial affordability may therefore be painting a somewhat misleading picture of the true position. This is highlighted by the fact that the simple house price to earnings ratio – which does not depend on the current level of mortgage rates – is still some way above its long-run average. The recovery in housing demand could therefore easily stall if and when interest rates begin to rise again. Although base rate is unlikely to increase in the near future, the money market swap rates that determine fixed rate mortgage pricing have already begun to increase in anticipation of an economic recovery and in response to record levels of government bond issuance (gilts)."

Home.co.uk’s latest asking price index also suggests an improvement in the housing market. While the typical marketing time for a property for sale was a record 184 days in May this fell to 129 days during June.

 

By Joe Lepper

See also: Nationwide House Price Index, Home Asking Price Index, House Prices and Trends by Town and Postcode, Mortgages

 

 

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