House price rises are here to stay!
Christina Jordan explains why recent statistics make her feel positive about property prices
Before I say anything about property prices I feel it's prudent to declare an interest. I bought my first property in the summer - a two-up two-down in Manchester - and the house prices indices have been smiling on me ever since.
The reason I make this declaration is because some readers like to know if a journalist has a hidden agenda. And now my property status is out in the open.
Of course pretty much everyone reading this article has an 'agenda' on house prices. You probably either own one or want to own one, but it doesn't mean you can't see both sides of the story, or the stats.
I'm positive about house prices, despite knowing there's plenty that could upset the applecart in 2010. Although I would actually prefer house prices DIDN'T increase while I own this property. I'm on the first rung of the ladder and upgrading to a larger or more expensive home would be financially more appealing if prices were falling not rising.
But I think they will rise and here's why.
Demand driving prices
Demand is exceeding supply across the housing market, according to the National Association of Estate Agents, which registered five house hunters to every available property in October. The average branch has a healthy 287 house hunters on its books.
The trade body says that this demand is pushing up prices and the gap between asking prices and selling prices dropped from 10.9% in September to 8.8% in October. In other words sellers are achieving 91.2% of their asking price.
Price rises strong and sustainable
Most house price indices have noted consistent increases over the summer and into autumn and the October data looks not only strong but sustainable.
Nationwide for example noted that prices rose by 0.4% in October to £162,038, a smaller rise than the 0.9% in September and the 1.4% in July and August.
The summer figures had been considered unsustainable by many and the fact that prices are now increasing at a more modest pace makes it less likely we will enter a (mini) boom and bust situation. Nationwide now reckons that prices are 2% higher than a year ago, and 4.6% higher than at the end of 2008.
Halifax also noted a rise of 1.2% in October, the fourth consecutive monthly increase. Nationally, house prices have risen by 2.9% since the end of 2008 according to its index, and are now 7.1% higher than six months ago. Halifax says the average price is now £165,528.
Rightmove noted the largest October rise for six years, pushing average asking prices up by 2.8% to £230,184 - 0.2% higher than a year ago. This rise is led by a strong recovery in London, where prices are now at the highest Rightmove has ever measured.
One of the most interesting notes in the latest house price reports is Nationwide's suggestion that the more moderate house price increases seen in October could reflect a more natural (ie higher) level of stock available for sale, alleviating some of the property shortages seen during most of this year.
Despite the fact that there is still clearly more demand than supply, supply appears to be increasing. And if price rises continue in the face of increased supply, the doom-mongers cannot use the argument that a chronic lack of available property is the only thing sustaining the market.
Of course, there's an element of truth there, but more people are now putting their homes on the market and prices are still rising, albeit more slowly.
And it's not just Nationwide noticing the trend. Halifax also notes that more people are deciding to put their homes on the market, encouraged by the recent improvement in market conditions.
The National Association of Estate Agents says this increase in sellers is great news for the market, despite the fact it may see a leveling out of prices in the near future. It argues that it will provide firmer footing for a real market recovery.
Consumer confidence is on the up and the impact sentiment has on the market should not be underestimated.
Indeed Nationwide points out that it is has historically seen a correlation between its Consumer Confidence Survey and actual house price inflation and points out that people's expectations of house prices can be an important short-term driver of market activity. Rising price expectations give wannabe buyers an incentive to bring forward their purchases.
So how confident are we feeling right now? Well Nationwide says that house price confidence has risen throughout the year and expectations are now for 'stable to slightly positive house price inflation in the near term'.
Property portal Rightmove has also noticed increasing confidence. Its latest Consumer Confidence Survey shows that only one in 10 of 30,000 respondents now believe house prices will fall in the next 12 months, compared to seven in 10 at the start of the year. And over half of respondents think prices will be higher in a year's time.
Mortgage market thawing
Lending is also continuing to rise, with the Council of Mortgage Lenders estimating volumes for quarter three are 18% up on quarter two.
In addition, lenders launched a raft of products during October, with many cutting mortgage rates more than once during the month, and making more attractive deals available to borrowers with smaller deposits.
We are by no means out of the woods yet but it is definitely easier to borrow than it was three months ago.
Plus recent news of further Regulated Mortgage Backed Securities deals in the last month has provided early signs that the wholesale markets have begun to thaw. Nobody expects to return to the days of 2007 but if lenders are able to attract investors again, it would give them much needed funding and allow them to lend more competitive products, as Cliff D'arcy explains in Great news for Homebuyers.
Last but not least, mortgage rates remain low and are expected to stay low until at least the middle of next year. This ongoing affordability is key, as many aspiring homeowners will buy if they can afford to buy.
I predict that house prices in October 2010 will be higher than they are now. What do you think?
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