UK residential prices keep rising due to chronic lack of supply

Share on Pinterest

A chronic lack of property for sale is pushing up prices of residential real estate in the UK but there is still no sign of increased lending, according to the latest figures to be released by various industry sources.

UK house prices rose 2.6% in the three months to the end of August, according to The Department for Communities and Local Government (DCLG). It said prices increased by 0.5% on average in August alone, and over the quarter to the end of the month were up 2.6%.

At the same time The Royal Institution of Chartered Surveyors revealed that its headline house price balance has grown to its highest level since a year ago. Almost a quarter, some 22%, of surveyors thought prices had gained rather than declined during September, the highest amount since May 2007.

The organisation, though, is warning that the country is divided, with prices increases firmly centred on London and the South East of the country and it is a chronic lack of supply that is keeping prices up.

Experts in the UK real estate industry are continually warning that more lending is needed if the recovery in prices is to be sustainable. This comes as the latest figures show that lending was down in August.

‘A lack of supply is still underpinning the rise in house prices with new instructions to estate agents only edging up very gradually. Meanwhile, despite the problems first-time buyers are continuing to encounter in securing finance, the level of enquiries from potential purchasers is increasing,’ said RICS spokesman Ian Perry.

‘This imbalance between demand and supply suggests that house prices will move higher in the near term,’ Perry added but there is still concern that lenders are not doing enough to entice new buyers into the market.

According to the Council of Mortgage Lenders new mortgages fell 5% in August although lending is still some 30% higher than the same period last year.

Although there is confidence that interest rates will remain at their current low of 0.5% for some considerable time. According to the influential think tank, the Centre for Economics and Business Research (CEBR), interest rates will remain at their current historic level until 2011. Its latest forecast predicts that rates will not reach 2% until 2014 as a result of the severe fiscal squeeze on the UK economy which will result in tax rises and spending cuts.

Last week, the Bank of England’s Monetary Policy Committee elected to retain interest rates at 0.5%, the seventh consecutive month that rates have been at this level.

 

Share on Pinterest

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>