Improved mortgage lending and house building figures have given a boost to the UK property market, adding to optimism that the sector has stabilised.
The latest figures from the Council of Mortgage Lenders (CML) said that the total amount of lending rose by 5% in October to an estimated £13.5 billion, but lending is still low compared with a year ago.
The CML said the rise in lending is due to more new mortgages being taken out rather than current owners who are re-mortgaging. The overall rise though is in line with typical seasonal patterns and should not be taken as an underlying sign of improvement.
As total lending in October last year was 27% higher at £18.46 billion, the CML is cautious about talking up the figures. ‘The coming months are likely to be dominated by seasonal factors rather than underlying change, said CML economist Paul Samter.
Meanwhile, the latest government data shows that house building increased 18% in the three months to September. New housing starts have now risen for three consecutive quarters after falling by 32% in the same period last year, followed by a 27% decline in the final quarter of 2008.
However, experts are warning that it is still not be enough to match government targets or the huge expected rise in demand for housing in the nest few years.
‘The latest figures are still weak in an historic context and suggest that the total starts for the year will struggle to come in much above 90,000. Significantly, this is barely a third of what is required over the coming years, given likely trends in demography and household formation,’ said Simon Rubinsohn, chief economist for the Royal Institution of Chartered Surveyors.
‘The numbers for 2010 should be a little higher, although, with development finance still constrained, we think it improbable they will reach 130,000, even with a recovery in the wider economy. The resulting shortfall in new property coming to the market represents a medium-term time bomb for the housing market, making property increasingly unaffordable to large sections of the population,’ he added.