News: Weekly News Round Up - Monthly House Price Rises No Longer A Blip

Fri, 03 Jul 09

The recent spate of monthly house price rises may not be the blip analysts had first predicted.

The Nationwide building society’s latest house price survey showed a rise of 0.9% during June. This is the third rise in four months and means for the first time since December 2007 the quarterly rate of change is positive.

It also means that for the first time since July 2008 the year on year fall in prices has been in single digits.

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 - see Home News 30 Jun 2009.

“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,” he says.

These latest comments from Gahbauer are a far cry from the pessimism displayed by the Halifax last month when it announced an even more dramatic monthly rise of 2.6% in its house price survey for May – see Home News 4 Jun 2009.

At the time Natish Patel, the group’s housing economist, expressed none of the optimism shown by Gahbauer. Patel rather grimly pointed out that the monthly house price figures during 1991 to 1992 rose five times, but overall during the period prices fell by 11%.

Among the reasons for this very real sense of optimism among analysts such as Gahbauer is a lack of supply of housing stock.

"Another factor that is vital to demand levels is housing affordability,” says Gahbauer.

“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,” he adds.

He warns though that if this promising situation is to continue interest rates need to remain low.

“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)," he warns. 

Evidence that house buyers are increasingly able to find attractive mortgage deals emerged from the Bank of England this week. Its latest figures show that the number of mortgage approvals for house buying rose slightly from 43,191 to 43,414 during May.

This is the fourth month in a row that approvals increased and gives further cause for optimism that sales will also rise.

Home.co.uk’s latest asking price index also suggests that an increase in sales is imminent. This showed that the marketing time for a property reduced dramatically from 184 to 129 days between May and June.

Commenting on the Bank of England Mortgage Approvals data, Simon Rubinsohn, RICS chief economist estimates that the number of mortgage approvals will increase over the year and could reach the 50,000 mark over the summer.
"The RICS 'New Buyer Enquiries' series which typically lead mortgage approvals by around three months suggests that despite the flatter picture in May, mortgage approvals will (on a seasonally adjusted basis) push up towards the 50,000 area over the course of the summer,” he said.

Further evidence that mortgage lending conditions will improve came from the Bank of England’s latest Credit Conditions Survey.

Lenders responding to the survey said they had already increased the availability of secured credit to households over the last three months and were optimistic of further improvements over the next three months.

Council of Mortgage Lenders economist Paul Samter said that the improvements in credit availability highlighted in the survey are likely to lead to better mortgage deals for borrowers over the coming months.

There is also optimism among buy-to-let landlords. Well, at least those living in the top ten buy-to-let property hotspots, which were announced this week by PropertyEarth.net and The Times.

According to The Times: “Buy-to-let landlords have been hard hit by the property crash, along with private homeowners. But one small silver lining in the generally gloomy outlook is that, with property prices coming down faster than rental values, yields are actually rising for many purchasers of rental property."

Topping the list is Glasgow, where buy-to-let landlords can expect a yield in the region of 12%. Others in the top ten include Houghton Le Spring, Tyne and Wear, and Telford, Shropshire, where buy-to-let investors can expect an average yield of 10% - see Home News 2 July 2009.

BBC programme makers are also clearly optimistic that viewers’ appetite for property information is far from waning. This week it emerged that the BBC had commissioned another daytime property series, a 20 part series that will focus on the potential of vacant and neglected properties to be transformed – see Home News 1 Jul 2009.

Production company Ricochet, which made the BBC1 property series Open House, are now looking for home buyers and owners to take part. It is particularly interested in speaking to home buyers looking for a home that needs work and those who have already renovated an empty property and turned it into their dream home.

By Joe Lepper

See also: Home Finance, Buy-To-Let Mortgages



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