House prices up - but it's no time for champagne

by Robyn Hall Friday 06 November, 2009

It's taking time but the housing market seems to be slowly bubbling back to life.

This time last year the world was in economic turmoil, prices were dropping and disaster seemed to lurk behind every corner.

But a flurry of recent data from various sources suggest that while we're not out of the woods yet we do seem to be making progress.

Indeed, data from the Land Registry's House Price Index, published last week, shows a rising market with a monthly house price change up of 0.9%. While not a big increase on August's rise of 0.5% it certainly seems to be a step in the right direction as confidence ebbs back.

The annual drop of 5.6%, up from a low of minus 16.3% in February, takes the average house price in England and Wales to £158,377.

London led the way in house price gains, with prices up 1.3% and the average property price in the capital now standing at £314,954.

Elsewhere in the UK all regions experienced a decrease in their average property values over the last 12 months.

Again the North East has been hit the hardest, with an annual price fall of -8.2%. And Neath Port Talbot experienced the greatest annual price fall with a drop of 18.7%.

Overall the picture is better than it has been. The Land Registry data is another indicator that is showing the housing market in recovery.

It's certainly no time to crack open the champagne though.

Higher house prices mean people will need higher mortgages and lenders don't appear to be relaxing their lending criteria just yet, although they are becoming more competitive for the right customers.

The Land Registry data also sits well alongside figures from Nationwide which last month reported prices were up for the fifth month in a row.

Still, it unnerves me when people start to talk about economic recovery alongside house prices as it just doesn't feel like we're quite there yet.

All the City pundits were predicting we would be out of recession this quarter and then shock figures from the Office of National Statistics showed that Britain is experiencing its worst recession since the mid-1950s.

Rather than positive growth the ONS figures showed a 0.4% fall in gross domestic product in the third quarter of the year. This really is quite something and to quote the Liberal Democrat shadow chancellor Vince Cable a real "cold blast of reality".

Quarterly records of GDP go back to 1955. Since that time, there has never, until now, been six quarters of contraction in a row. Times are indeed dire and so while the economies of both France, Germany and the US  power ahead having weathered the storm, the UK is languishing in its role as the sick man of Europe.

What's been quite interesting of late though is the number of estate agents that I have spoken to that seem to be enjoying a return to business.

They genuinely believe that we have turned the corner and are well on our way towards recovery.

But I'm not so sure. People may still be buying property and prices slowly increasing but it could well be a false spike.

All of the other anecdotal evidence points to parents and relatives shelling out vast deposits for their children to purchase homes while prices have supposedly bottomed out.

That being the case then current house price increases will not last forever and a further downturn seems almost inevitable as the market bubbles forward.

What do you think? Vote in our poll below.

What's happening to house prices in your area? Let us know and leave a comment below.

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Categories for this post: Mortgages | house prices

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Comments

Paul Walker says:

Monday 09 November, 2009 / 08:18

Keyword - 'Bubbling' back to life....

Average Salary £25K
Average house price £158K
Unemployment heading north of 2.75M

it's time to take our medicine..........

Chris says:

Monday 09 November, 2009 / 09:26

hmmm, Im still trying to get on the ladder, got mortgage sorted for £85k + £15k deposit. Cant find 3bed ex council house for less than £130k... So maybe have to go for a 2 bed terrace or something. This scares me as there is the possibility that I buy now, with the outlook of upgrading in 5 years, but who knows where the market will be in 5 years!!

GRAHAM says:

Monday 09 November, 2009 / 19:17

chris,i,ve just agreed to sell an ex local authority house 3xbed ,d/g ,c/h  for £100,000,so they must be out there ,just not in your area.buy at least a 2xbed with the longest term possible  30 or 35 years ,your repayments will be less and you will be on the ladder ready for the step up ,good luck

Money Saving Expert says:

Tuesday 10 November, 2009 / 16:48

For every ten homes sold last month one was a remortgage. Until more mortgages arranged are remortgages each month I very much doubt that property prices will rise. The reason for the house prices being reasonably buoyant is due to the fact that for every ten houses sold only six new homes are coming on to the market - this is keeping the price of houses artificially high. It’s based on the law of Supply and Demand.

The remortgage market needs to be stimulated before house prices rise. This will only happen when the lenders who currently have no appetite to lend start lending to first-time-buyers and remortgage borrowers looking for a 90% to 95% and re-evaluate their lending criteria.

So far all the Bank of England’s quantitative easing has not helped the mortgage market apart from stabilise the banking system. We need savers to start receiving more interest for investing their hard earned money in the banks. Unfortunately a side-effect of this would be an increase in mortgage costs to borrowers.

But alias this will happen when we come out of this recession and the cost of borrowing starts to rise, workers demand higher wages, mortgages will become more expensive and savers will start to receive better interest rates for investing their money; fuel costs and gold will start to rocket and inflation will rise to dizzy heights then finally we will see house prices rise.

This is a truly daunting realisation of the future as we struggle in the future to reduce our government borrowing and try to control inflation.  Would we not be better if house prices did not rise?

Penny says:

Tuesday 10 November, 2009 / 23:55

All I want to do is downsize, reduce outgoings and live my life because I've got into difficulty because of supporting a young adult son in higher education. My mortgage company won't let me downsize, and port what was supposed to be a portable mortgage!  If this was the case I could pay off what I owe and could manage better.  I have a flawless mortgage history to date.  It's a complete joke!  I am very lucky to have been in stable employment with a good middle earning salary for the last ten years and have around 25% equity, but they don't care about any of this, I'm just a number and a tick box, but I'm so angry I am complaining formally to the company and the FSA.  I don't like being someone they deal with in their 'tick boxes' I want to be treated as an individual!

chris weatherley says:

Monday 16 November, 2009 / 18:38

my old dad has had to fight LLoyds TSB who made him responsible for a mortgage on his property which had been forged - when he contested this he was told he could get a report from a hand writing expert that they recognised - got report they ignored it THOUSANDS of pounds later and he is having to move out of his home and find somewhere cheap to live.  Llloyds TSB are callous - my dad does not even have an account with them and got treated like this - is house ownership worth putting your life in the hand of these unscrupulous people Buyers beware - of the banks - don't rely on the ombudsman for fair play if he can avoid the issue he will.

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