Residential property prices in the UK have edged upward in both January and February, according to the latest figures from two leading house price indices.
The January data from the Land Registry’s flagship House Price Index shows that prices increased 0.2% from December taking the average house price in England and Wales to £163,177.
Overall though, it shows an annual price decrease of 0.9% with only two regions seeing an annual increase, London with prices up 2.4% year on year and the South West, up 1.6%. The region with the greatest annual price fall was Wales with a decrease of 6.1% and it also had the most significant monthly price fall, down 4.2%.
The most up to date figures available show that during November 2010, the number of completed house sales in England and Wales dropped by 12% to 54,012 from 61,058 in November 2009.
The number of properties sold in England and Wales for over £1 million decreased by 2% between November 2009 and November 2010, from 532 to 520, the data also shows.
Meanwhile the February index from the Nationwide Building Society shows that prices in the UK increased by 0.3% and is now 0.1% lower than a year ago.
Despite such, the overall picture is still one of a market treading water. Indeed, the three month on three month measure of house prices, a better measure of the underlying trend, was basically flat in February at -0.1%, the report also shows.
This shouldn’t come as too much of a surprise, according to Robert Gardner, Nationwide’s chief economist. ‘Housing market trends are closely linked to wider economic prospects. Given that the recovery hit a soft patch at the turn of the year and looks set to remain sluggish in the year ahead, the property market is likely to follow suit, with relatively low transaction levels and prices moving sideways or modestly lower through 2011, he said.
He believes that demand for homes has levelled out, supported by historically low interest rates and some stabilisation in the labour market. The continued uncertain outlook for the economy is likely to keep many potential buyers on the sidelines for some time yet.
‘Although the annual figure for house price growth has fallen, this was almost inevitable because there was a 2.1% increase in prices this time last year. That was never going to happen this time round, so we shouldn’t get too upset about the annual figure. The important thing to remember is that prices this month reversed a four month downward trend and this shows that the property market is not in terminal decline,’ said Paul Hunt, managing director of Phoebus Software.
‘It’s by no means time for homeowners and estate agents to start popping the champagne corks, but given that the economic outlook is uncertain and mortgage lending remains subdued, any upward movement indicates remarkable resilience in buyer demand,’ he added.
According to David Newnes, estate agency managing director of LSL Property Services, owners of Your Move and Reeds Rains the fact that transaction numbers are more than a third below the long term average demonstrates that we are still some distance from a full recovery in the market.
‘Buyer demand continues to be held back by the availability of mortgage finance, which is in part a consequence of the ongoing concern about household finances as interest rates look set to rise. Mortgage availability is still being constrained by lenders. But there is a sense among buyers that now is a good time to make a purchase, which puts the onus on lenders to help stimulate the market,’ he said.
While Eric Stoclet, chief executive of Crown Mortgage Management said that while the figures are encouraging they should not be taken as a sign that prices have turned the corner. ‘The time for homeowners to get excited about rising prices will be when mortgage finance becomes more widely available. Currently lending criteria are very tight and this has forced many buyers to keep their powder dry and continue in the private rental sector. If you want to know when we will see an enduring recovery in the property market, look first at what’s going on in the mortgage market,’ he explained.