|
The past month has seen yet more talk of a recovery in the property market and speculation that the prices have bottomed out.
Price indices have suggested at least a stabilisation in the market, following the dramatic falls seen in the early stages of the credit crunch and through the beginning of recession.
The Land Registry's index, which is said to be the most accurate independent house price index available as it is calculated based on completed sales, showed that values rose by 1.7 per cent in England and Wales in July.
This figure represents the strongest monthly growth since July 2004 and it is the third month in a row that typical values have risen, with the average house now priced at £155,885.
However, house prices in England and Wales are still 11.7 per cent lower than they were in July 2008.
Wales saw the greatest month-on-month growth in values, with average prices rising by 3.1 per cent, while the north-east experienced the second best improvement with a 2.3 per cent rise.
Yorkshire and Humber house prices saw the smallest boost, rising by 0.9 per cent month-on-month and down by 12.8 per cent year-on-year, which represented the second worst annual change.
However, Rightmove's index, which calculates seller asking prices for homes, showed that the average values in August dropped by 2.2 per cent compared to July, when they rose by 0.6 per cent month-on-month.
The organisation said that this reflected more realistic price-setting from sellers.
On a positive note, Rightmove also found in its survey that 75 per cent of home movers do not expect prices to fall in the next 12 months.
"After several months of activity and prices revving upwards from last winter's low point, both will start to hit the limiter without more mortgage finance," said Miles Shipside, commercial director of the company.
"In spite of pent up demand, the market and pricing is boxed in by restrictive lending criteria put in place to ration mortgages given the lack of funds available to lenders," he added.
The Department of Communities and Local Government's house price index calculates values on a quarterly basis and found that they rose by 2.6 per cent between April and June 2009, compared to a 3.8 per cent fall in the previous three months.
A similar story was told by Halifax, which reported a 1.1 per cent rise in the average UK house price in July, the second rise in the past three months.
Similarly, Nationwide's latest figures from August show that values rose by 1.6 per cent during the month, with the year-on-year decline in prices slowing from -6.2 per cent to -2.7 per cent between July and August.
Most analysts agree that the demand among buyers is there, leading to an improvement in market figures, but other factors are dampening a possible recovery.
"Clearly there is an increase in interest from buyers and we now need this to translate into a rise in the number of properties being put on the market by prospective sellers to unleash this pent-up demand," said Alison Beech, business relationship director at estate agent Haart.
"Overall, the picture is a positive one but extremely complex. There are a number of elements contributing to challenges faced by both the market and the wider economy. We're all hoping now for some stability," she added.
David Amstell, founder of online property website Briffy.com, offered a word of warning in interpretation of the latest market figures.
"Every year, come rain or shine, from the spring onwards there is always historically a rise in housing prices because that is when people like to do their buying the most," he asserted.
"If you take it over a longer period, history will probably show that prices have stayed pretty static," Mr Amstell added.
He took a more negative view, suggesting that "there is still a long way to go" before the market recovers and insisting that he sees no real reason why confidence should come back to the sector quickly.
Peter O'Donovan, head of mortgages at Bestinvest, made a similar observation, saying that predictions of a recovery next year are perhaps on the optimistic side, although he felt the idea of it being two years before an upturn would be overly pessimistic.
"I don't think it is going to happen overnight, but I think certainly over the next few months continued increase will bring a lot more confidence and a more optimistic view of when things will really start to change," he added.
Analysts continue to highlight a shortage of mortgage funding as the main obstacle to recovery.
Recent figures from the Council of Mortgage Lenders (CML) showed that financial providers handed out £16 million worth of home loans in July, which represented a 26 per cent increase compared to the £12.7 million granted in June.
However, the level was still down by 36 per cent compared to July 2008, when £24.9 million worth of home loans were doled out by financial providers. This also represents the lowest July lending level since 2001.
"The simple truth is that lower prices will encourage buyers but they will be constrained by things [such as] some of the difficulties in obtaining a mortgage, coming up with some of the sizeable deposits that first time buyers are paying, and having concerns about the economy, job security and future house prices," said Bernard Clarke, a spokesperson for the CML.
Meanwhile, the National Housing Federation (NHF) forecasted another potential problem for the property market in the coming years, suggesting that a shortage in the supply of homes will lead to price hikes.
It predicted this month that the average house price in England will rise by 20 per cent by 2014, when it will stand at £227,800.
The NHF forecasted that house prices will fall by 12.2 per cent in 2009 and decline by 4.6 per cent in 2010 before seeing their first increase in 2011, when they will grow by 1.1 per cent, stabilising the market.
According to the organisation, the first significant rise will be in 2012, when house prices will rise by 7.5 per cent, followed by an 8.4 per cent jump in 2013 and a more measured 6.8 per cent increase in 2014.
"Our new research shows that while house prices are falling in the short term, they will inevitably increase in the long term because of a fundamental under-supply of housing," said David Orr, chief executive of the NHF. |
