After falling 25% since the late 2007 peak, UK house prices have made a steady growth during 2009. The increased price has taken a few commentators by surprise. But, behind the figures of rising house prices, it is clear we have not witnessed a return to a thriving property market.
Hometrack stated that UK house prices rose for the third consecutive month, and Nationwide reported the first year on year increase since the credit crunch.
Hometrack report that property sellers are receiving 92.9% of the asking price up from a couple of months ago. However, like other agencies, they report the rise in prices is occuring despite a dearth of buyers. The main thing pushing prices higher is a shortage of supply.
Some factors that will influence the Property Market in the coming months
The price recovery will encourage more property owners to put their property on the market; many have been holding back during the house price falls. However, at the same time, many buyers were put off buying because of the rapid falls in prices. If people feel the worst of the house price falls are over, then more may be tempted back into the market.
Interest rates will rise sometime. At the moment, interest rates of 0.5% are making mortgage payments cheaper and preventing many having to sell. But, economic recovery could lead to higher interest rates. However, the recovery may be muted and interest rates could remain low for a considerable time. Also, unless people are on tracker mortgages, many banks haven’t passed the full rate cut onto homeowners so some will not see the full rate increase when it comes.
Unemployment likely to remain high during 2010 and 2011. The depth of the UK recession is depressing. It has now lasted 6 quarters – one of the longest on records. This will lead to a muted housing market.
Is it perhaps a better time to start renting out your property. Waiting for the markets to change then buying a property ?
A good article – I agree with most of what you say and indeed rising unemployment will continue to limit growth in the housing market and increased supply next year will certainly effect the slight ‘recovery’ of prices that we have been seeing.
It’s interesting that more people are starting to question whether we should want house prices to rise.
we talk about similar issues on our blog: http://www.thebigpropertylist.blogspot.com – come and check it out.
High house prices make it very hard for younger people and in future they will also be burdened with paying off the national debt, now at such high levels and paying for the government’s unfunded pension liabilities (which represent about the same amount again as the official government debt, nearly a trillion pounds). Surely to reduce house prices, without crippling borrowers across the economy, what is needed is a freeing up of planning permissions to build. There is some discussion of these problems at recession.co.uk.
I have just stumbled upon this site and have found it to be interesting and informative.
I have to agree with Angus here, with home prices like they are, the younger generation are finding it really difficult to purchase their own homes, I myself even battle to get a bond and because of this I am still renting, in South Africa many young people are still staying at home because of this and only moving out when they get married and there are to incomes to get finance on a bond, this is very sad.