House prices in England and Wales hit a record high in June but experts warn that it is London that is driving the increase and sales outside the South East are still low. The average house price in June was £232,801, up 0.2% on the previous month and up 2.5% on a year ago. It means that average prices have increased by £5,664 in the past 12 months, according to the LSL/Acadametrics index.
David Newnes, director of LSL Property Services which own Your Move and Reeds Rains estate agents, said that it has taken almost five years, but the housing market finally looks set on the road to recovery from the 2008 downturn. ‘House prices have never been higher. They reached a record high in May and set another record in June. The catalyst has been a significant improvement in mortgage availability which is thawing the frozen first time buyer market. Lenders are more willing to lend to high LTV borrowers, and this spate of activity at the bottom end of the market is reverberating all the way up the housing chain. The plethora of attractive mortgage deals on offer is working wonders and wider pools of buyers are flocking to the market,’ he explained.
However, he also said that the market still has a long way to go before it reaches its pre-2008 high. Sales figures for June 2013 are below the level of the previous three years, and first time buyer numbers are still low outside of the South East. ‘Obtaining mortgage finance is still difficult by historic standards, and the shortage of properties on the market is a key stumbling block to a more sustained climb in transactions. There needs to be continued confidence in the property market’s bounce back to persuade more people to trade up and put their home on the market,’ he pointed out. ‘The lack of supply is helping to boost prices but in the process making it more difficult for first time buyers. The market needs an increase in supply to ensure prices don’t rise out of equilibrium,’ he added.
Quote from PropertyForum.com : “The east of London is increasingly attractive for those looking to set up home in the UK capital, thanks to a combination of transport links, high quality local facilities and quality of life, it is claimed.”
He also pointed out that although house prices may have risen significantly in June 2013, the reality is that the annual growth of 2.5% is being driven by London. ‘Figures are slightly misleading, reflecting the influx of foreign buyers who are boosting property price growth in the capital. Money is pouring into prime areas from cash buyers and international investors looking to store their wealth in bricks and mortar. This growing demand for properties in central London areas is proving to be an important contributor to the 7.9% growth in average prices in London,’ said Newnes.
He called on the government to further support first time buyers in order to close the gap between opposite ends of the property market. ‘With economic conditions improving and consumer confidence rising, there are strong hopes that both the Funding for Lending and Help to Buy schemes will encourage more buyers and sellers to return to the market, which will support prices and may lead to long term recovery,’ he added.
The big question will be how much of the momentum currently being built up will be sustained. ‘There is a general view that the short term outlook is quite promising but that in the medium term, as government initiatives fall away, market uncertainty will return,’ warned Peter Williams, housing market specialist and chairman of Acadametrics. ‘If buyers and sellers continue to return in numbers to the market, supported by rising prices and more credit, then the greater the likelihood this forward momentum can be sustained,’ he added.