News: Weekly News Round Up - Even Land Registry Says Prices Are Stabilising

Fri, 31 Jul 09

At last the Land Registry has caught up with building societies and Home.co.uk’s asking price index in realising that house prices are no longer on a downward spiral.

For the first time since January 2008 the Land Registry’s latest house price index for England and Wales, which is based on completed sales, has shown a month-on-month rise – see Home News, 29 Jun 2009.

Admittedly this modest rise, of 0.1% between May and June, hardly signals a dramatic increase in prices. But after the marked fall in prices during 2008 and the first part of 2009 the figures do add further weight to the argument that prices are now flattening out and the worst of the property slump may just be over.

According to the Land Registry: “This is the first time in well over a year that the monthly change has been positive. However, as the monthly increase is only 0.1%, the movement does not signal a return to solid growth, but rather flattening prices."

A regional breakdown of the figures shows that not all areas are experiencing this flattening in prices.

Rises were recorded in London, the West Midlands, the South West, the South East and the East of England.

However, prices fell in five other regions, by 0.1% in the North East, by 0.9% in the North West, by 1.1% in the East Midlands, by 1.1% in Wales and by 1.2% in Yorkshire and the Humber.

Despite first appearances this does not necessarily mean a north-south divide is emerging in terms of house price rises.

The figures do show that the average price for a home in London is now £301,859 and in the North East it is £106,424 but, on a local authority level, Middlesbrough experienced the smallest annual house price fall in June, down 7.9%, with Luton seeing the biggest fall, down 23%.

The figures from the Land Registry also show that flats and terraced homes have seen the sharpest fall in value over the last 12 months.

The average price of a detached home has fallen by 12.2% since June 2008, but during the same period the price of flats and maisonettes fell by 14.8% and terraced homes by 14.6%.

Home.co.uk’s latest asking price index for July indicates that further modest rises may be on the horizon in the coming months. This shows that the average mix-adjusted asking price for homes on the market in England and Wales rose by 0.3% between June and July.

The Nationwide Building Society, which has also recorded a number of monthly house price rises this year, feels optimistic enough to say that there is a "reasonable chance" that house prices could end the year higher than they started in 2009.

The Nationwide’s chief economist Martin Gahbauer says this was “unthinkable” a few months ago.  However the building society’s recent figures have shown a 1.3% rise in prices between June and July, putting the annual rate of decline well into single digits at 6.2%.

"House prices have been remarkably resilient so far this year, despite a recessionary economic background with sharply rising unemployment,” Gahbauer added.

A similar picture of price stabilisation has emerged in the US, giving further credence to the theory that the worst of the global housing price slump is over.

Prices rose 0.5% in May from April, according to the Standard & Poor's/Case-Shiller Home Price index.  The index committee's chairman David Blitzer said the figures were a positive sign that declines in house prices are stabilising.

"To put it into perspective, this is the first time we have seen broad increases in home prices in 34 months," he added.

According to financial website efinancialnews.co.uk  this week the UK property market could soon be mirroring another feature of the US housing market – large scale, low cost and privately-rented housing stock.

With first time buyers still frustrated in the property market the website says that plans are afoot to launch large-scale rental home building projects in the UK. These are already popular in the US and have been subject to significant investment since Barack Obama’s election victory.

Aviva insurance group, the website reports, is about to launch an investment fund, funded by up to £1 billion, to construct mass-scale, build to rent homes in the UK.

The website reports that one plan already being considered through the fund is a 100 unit project in residential blocks in a yet to be named south-east England town.

Finally, the spate of recent news that mortgage approvals are increasing continued this week with latest figures from the Bank of England.

These show that the number of mortgages approved for house purchases in June rose to 47,584, up from 44,169 the previous month and the highest number since April 2008.

This was the fifth month in row that the number of approvals has risen.

The Council of Mortgage Lenders economist Paul Samter said of the figures: “ Activity is certainly more positive than at the start of the year. This is consistent with the improvement in housing market sentiment, but the outlook is still sluggish, as capacity constraints on the lending industry and continuing deterioration in the labour market will act as a brake on the pick up.

“Overall, these numbers are consistent with our outlook for a gradual improvement from historic lows following the financial system turmoil last year, but for any recovery to be slow and drawn out.”

By Joe Lepper

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

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