Property prices in the UK are steadily creeping upwards with three indices all published in the last few days all showing a rise of 0.4%, an encouraging sign that suggests the market is in recovery. According to the latest Nationwide index the price of a typical home increased by 0.4% in May and was 1.1% higher than May 2012 taking the price of a typical UK home to £167,912.
The flagship Land Registry Index also shows that house prices in England and Wales increased by 0.4% in April taking the average price to £161,458. The index’s April data also shows an annual price increase of 0.7%. The latest Hometrack index also shows that house prices in the UK grew by 0.4% in May, the highest increase in a single month since May 2007.
According to Robert Gardner, Nationwide’s chief economist, the figures provide further support for the view that the housing market is gradually gaining momentum. ‘The three month on three month measure of house prices, which is a smoother measure of the underlying trend, has been in positive territory since October last year. The annual rate of house price growth also ticked up to 1.1% in May, the fastest pace since November 2011,’ he said.
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‘It’s not just prices, a number of measures of housing market activity have also started to move higher. In the first four months of 2013 the number of property transactions was running at around 5% above the monthly average prevailing in 2012. The number of mortgage approvals for house purchase in the first quarter of 2013 was also around 4% above last year’s monthly average,’ he explained. ‘A number of factors are likely to be contributing to the pickup in activity. There has been an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures, such as the Funding for Lending Scheme. Indeed, mortgage rates have fallen back towards all time lows in recent months,’ he added.
However, there is a gap opening up between London and the South East and the rest of the country. According to the Land Registry figures the region in England and Wales which experienced the greatest increase in its average property value over the last 12 months is London with a movement of 6.2%. London also experienced the greatest monthly rise with a movement of 1.4%. The region with the greatest annual price fall is the North East with a decrease of 5.7% and also saw the most significant monthly price fall with a decrease of 1.6%. Additional data from Hometrack shows that prices in London have increased by 0.9% in May and by 0.5% in the South East but excluding these two areas the overall rise is just 0.1%.
While the growth in buyer numbers is following a similar pattern to recent years, it is a lack of housing for sale that is acting as the primary driver of price rises, says Hometrack. The number of sales agreed is outstripping the number of new properties coming to the market. Nationally, new supply grew by 2.8% in May while sales agreed were up 8.2%.
The gap between supply and demand in London is the largest it has been since spring 2009. In the last six months demand has grown 15% while supply has declined by 0.6%. Across the rest of the country the trend in prices is upwards with demand rising ahead of supply, albeit at a lesser extent than in London and the South East. Prices were static in four regions; the North East, North West, Wales and Yorkshire and Humberside, and grew in a further four; East Anglia, the East Midlands, the South West and the West Midlands.
However, there are some encouraging signs, for example, the average time on the market has fallen back to 8.8 weeks, the lowest level since July 2010, but there are regional variations. The sharpest falls in time on the market have been seen in Southern England at 7.2 weeks compared to around 11 weeks in the Midlands and Northern regions.
‘While levels of demand for housing have been increasing each month, the total growth in buyer numbers has been broadly in line with that seen in recent years. But it is a lack of housing to buy that is driving the acceleration in prices. The shortage is being exacerbated by the rate of new stock coming to the market failing to keep pace with the number of sales agreed,’ said Richard Donnell director of research at Hometrack.