Home.co.uk
Home.co.uk

News: House prices hit new May high, say LSL

Fri, 14 Jun 13

House prices climbed by 0.4 per cent from April 2013, boosted by a strong surge in sales, which have risen 19 per cent in the past 12 months. London is the main driver, though, with northern regions still struggling against the UK recession.

David Brown, commercial director of LSL Property Services, comments: “House prices rose in May to the highest on record. Even taking inflation into account, the record high price is symbolic of the significant improvement in the housing market over the past year. Prices are £6,125 higher than in May last year, sales are up 19% over April, and prices have only dropped one month out of the past eighteen. The catalyst for all this has been significant improvement in mortgage availability. Life for first-time buyers is noticeably easier than it was six months ago. An abundance of great mortgage deals are on offer and lenders are more willing to lend to high LTV borrowers, which has led to a substantial rise in first-time buyer activity. Schemes like Help to Buy and Funding for Lending have acted like a steroid injection for the mortgage market and made it markedly stronger than last year.

“But it is not quite as good as it looks. Take London out of the equation and the average price falls dramatically. The red hot London market is giving the property market as a whole a deceptively healthy glow. London still leads the way in terms of house price rises with growth in 31 out of 33 London boroughs annually, and is the only region in England with average prices above previous record levels. The North/South divide is actually becoming more prominent as time goes on, and as the London market is more exposed to a wider audience of potential foreign buyers flocking to the capital. A strong economy is vital for the health of the property market and it is performing much better in London than in other less resilient parts of the UK, which are suffering from public expenditure cuts. More needs to be achieved to help banks lend to new buyers, as a strong improvement in first-time buyer lending is the crucial catalyst for a full market recovery.

“On top of that, the supply of mortgage finance is still constrained, despite improvements over the past year. Many buyers remain locked out of the market because they can’t afford to meet strict mortgage requirements and save enough for a deposit, which is why cash buyers still account for a high proportion of the total number of sales. Lenders’ caution will not disappear, as new regulations and controls continue to hamper their ability to lend. The only real solution is a sustained improvement in the wider economy which will help increase the supply of mortgage finance and improve demand for it.”

Dr Peter Williams, housing market specialist and Chairman of Acadametrics, adds:”Based on statistics from the last eighteen years, transactions in May are on average 9% higher than in April. There is a bias towards the summer months in the purchase of homes, with May normally heralding an increase in housing transactions. This year we estimate that May transactions have increased by 19% over April, meaning that the May 2013 market is proving to be stronger than average, although the April figures this year were more subdued than normal, perhaps as a result of the cold spring.

“One possible reason for transaction levels rising is an underlying increase in activity by first time buyers. Although the March 2012 figures were distorted by the ending of the tax holiday for first time buyers, the CML reports that “First-time buyer activity in the first quarter of 2013 was at nearly the same level as last year - when figures were buoyed by the end of the stamp duty holiday. This suggests that the market continues to be favourable for many of those looking to buy their first home. First-time buyers also continued to account for an increasing proportion of all house purchase loans - increasing to 45% in March from 43% in February.”


See also: LSL Acadametrics House Price Index

Back to: News Index