The figures from the latest LSL/Acadametrics index show that house prices have now increased by £5,796 in the last 12 months or 2.6%. On a monthly basis prices were up 0.3%.
David Newnes, director of LSL Property Services plc, owner of Your Move and Reeds Rains estate agents, pointed out that house prices have never been higher and 2013 has marked the time when the property market recovered from the 2008 financial crisis.
‘House prices are growing steadily, signifying long term recovery is becoming a reality. Mortgage lending in May was up by over a fifth compared with April and 17% stronger than a year ago, while the number of first time buyer mortgages are at the highest since 2007,’ he said.
‘Typically the property market flourishes in the summer, and July sales are the highest so far this year. But the improvement is more than just a seasonal trend. The market is palpably stronger than a year ago and confidence is returning to lenders and buyers,’ he explained.
‘The Funding for Lending scheme can take plenty of the credit, as can Help to Buy. Both schemes have helped banks boost first time buyer lending by providing them with credit to offer more loans to new buyers and reduce rates on house purchase mortgages. Funding is more accessible for lenders, while banks are more confident than they were six months ago which bodes well for the future,’ he added.
He also explained that if this improvement continues to be powered by the strong performance in the London, where prices are rising far faster at 7.1% than in other parts of the country and supply is restrained, and without a sudden rush of properties hitting the market, prices will rise even more over coming months.
Domestic and foreign buyers' interest for bricks and mortar in London appears to be undiminished. ‘The bottom line is that the divide between London and the rest of the UK housing market is deepening, with parts of London operating at an entirely different level from the rest of country, and even from the rest of the capital,’ said Newnes.
However he warned that despite this overall improvement in the market, the level of first time buyer activity is still around half of what might be considered normal levels. ‘Both the lack of housing supply and rising competition in the property market are supporting prices, but at the same time making it more difficult for first time buyers. The government urgently needs to address housing supply if it is serious about boosting home ownership levels. One way would be to remove stamp duty, which is a disincentive to buying for both home movers as well as first time buyers,’ he added.
Peter Williams, housing market specialist and chairman of Acadametrics, pointed out that house prices are continuing to edge upwards, and on a monthly basis the average price has increased in 16 of the last 20 months.
The trend is that prices have been rising over the last year on a near straight line basis, with only August 2012, the month of the London Olympics, seeing a noticeable decline in average house values. Excluding the downturn in August 2012 and the short lived upturn of 0.8% in February 2013, house prices have been increasing in a tight band of between 0.0% and 0.4% per month for most of the year. This month’s increase of 0.3% is near the top end of that range.
He also pointed out that on an annual basis the average house price has increased by 2.6% since July 2012. This level of house price inflation is below that of the Office of National Statistics annual Retail Price Inflation (RPI) Index of 3.3% for June 2013. ‘So in real terms house prices have fallen over the last 12 months. Although some housing commentators have expressed concern that house prices in 2013 will bubble out of control, there is no evidence to date suggesting this has happened in any but a few exceptional localities,’ explained Williams.
He also pointed out that during 2013 there has been a gradual increase in housing sales when compared to 2012 with a 5% increase in sales over the first seven months of this year compared to last year.
Indeed, looking at the second quarter of 2013 compared to the second quarter of 2012, transactions are up 12.5%, so the middle part of the year is proving to be far busier than anticipated.
‘The main factor has been the easing of credit conditions, enabling more potential purchasers to obtain a mortgage. The mortgage lenders have been assisted by the Bank of England’s Funding for Lending scheme, which has resulted in more competitive products being offered in the market place. This is especially true of lending to first time buyers,’ Williams explained.
He mentioned that according to the Council of Mortgage lenders first time buyers accounted for 45% of all loans for house purchase in May 2013, similar to the levels of the past few months but considerably higher than the 38% seen on average since 2007.
‘The weather and the Olympics suppressed both demand and sales in 2012. There were record levels of rainfall between April and June 2012, which literally dampened demand for housing. We should perhaps therefore not be surprised to see the opposite effect of an increased demand for housing in the early summer months of 2013,’ he concluded.
