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House prices still on rise but more supply will flatten growth

09/02/2010 10:06:00
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image House prices are rising but increase in supply should see prices stabilise

UK residential property prices rose for a seventh consecutive month in January, increasing by 0.6% but the outlook for the year is flat, according to the latest index to be published...

UK residential property prices rose for a seventh consecutive month in January, increasing by 0.6% but the outlook for the year is flat, according to the latest index to be published.

Mortgage lender Halifax said that prices have now risen 9.9% since the lows of April 2009 and they are up 3.6% on the same time last year.
  
But the figures show that the price increases are slowing with January’s rise more modest than in any of the previous six months. Halifax also expects prices to remain flat in coming months as more properties are coming onto the market and it has been a lack of supply that has been driving prices upwards.
   
So although the pace of the recovery in the property market has surprised many commentators and means property values have retraced almost half their August 2007 to April 2009 decline there are now checks on growth.
  
‘A further increase in the supply of property is possible over the coming months, which would help to curb the upward pressure on prices,’ said Halifax economist Martin Ellis.

 

The Bank of England’s decision yesterday to put its quantitative easing programme on hold and keep interest rates at the historic low of 0.5% means rates are likely to remain low until the second half of 2010.
  
‘The marked reduction in interest rates over the past 15 months has, from a low base, boosted housing demand from those with a sufficient deposit to enter the market,’ said Ellis.

Others agree that price growth is likely to be muted. ‘We are sceptical that the marked rises in house prices seen since early 2009 can be sustained given a still far from favourable economic environment,’ said Howard Archer at Global Insight.
  
‘Future developments in unemployment, earnings and interest rates will be key factors to future movements in house prices,’ he added.
  
The average price of a house is now £169,777 compared with £154,490 last April. ‘Overall, our current view is that house prices will be flat during 2010,’ added Ellis.

 

 

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