Home.co.uk
Home.co.uk

News: House prices surge, but is this a bad time?

Asking prices for UK homes took a 1.3% leap in November, according to the latest asking price index from Home.co.uk. This means that nationally, average house prices have increased for three, successive months and is a sure sign that sellers’ confidence is growing.

Asking prices for homes, currently on the market, in England and Wales increased by 1.3% this month making November the third month in a row of consecutive price rises, according to the latest asking price index from Home.co.uk.

This further rise takes the 12-month change in average asking prices into positive territory for the first time since December 05 and now stands at +0.5%.

Confidence amongst sellers of residential property has increased markedly over recent months as indicated by a plentiful supply of properties new on the market with higher asking prices.

Regional average asking prices for November 06, showing gains and losses over the last six months.

Scotland

£161,146

+7.7%

Wales

£193,758

+7.4%

South West

£264,697

+5.8%

North

£170,366

+3.0%

Greater London

£313,854

+2.8%

South East

£275,059

+2.7%

Yorkshire and Humber

£172,535

+1.8%

West Midlands

£200,831

+1.5%

East Anglia

£255,135

+1.3%

North West

£186,068

+0.6%

East Midlands

£186,720

-2.0%

House prices surge toward a ‘tipping point’

A rally in asking prices signals an up-lift in market sentiment and a new upward trend, but the timing could not be worse, argues Home.co.uk.

These asking price rises come in the wake of September’s interest rate hike by the Bank of England suggesting this initial inflation fighting measure was ‘too little too late’ to tame the inflationary pressures faced by the economy.  This month, the UK central bank issued a further dose. 

Will this second hike have the desired gentle braking effect on the run-away train that is the UK property market or will it stop dead in its tracks?

The combination of rising asking prices and interest rates is taking the UK property market into dangerous territory. In Q1 2005, high asking prices caused the number of monthly transactions to plummet. The market wobbled before transaction levels recovered through cuts in asking prices and the Bank of England base rate.

The market looks set to wobble again.  Increases in the cost of borrowing coupled with rising asking prices are likely to slash transaction volumes and drive the market toward a ‘tipping point’.

If the housing market retains some fluidity, the short-term outlook for first time buyers is bleak.

Director of Home.co.uk, Doug Shephard laments: “Since 2004 we had observed a slow, downward trend in house prices - it looked as though the affordability gap for first-time buyers was closing as the ‘froth’ melted away.  Over the last six months, the opposite trend has emerged.  With sellers’ confidence in the market on the rise and increasing interest rates, the affordability gap for first-time buyers is rapidly widening,”

Caught between a rock and hard place, the Monetary Policy Committee (MPC) has no choice but to try bringing inflation under control.  However cautious the approach, their actions could trigger a severe downturn in the UK housing market. The risk of reaching the ‘tipping point’ is real, similarly inflated property markets in Australia and the US have already tumbled, because of inflation fighting, interest rate hikes.

More on the dilemma the MPC could find itself in and the nasty surprises that could be in store can be found in our viewpoint section this week at http://www.themovechannel.com/articles/

 

 

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