30
Jul
Homes 'may rise in value in 2009'
The UK's largest building society believes there is a
"reasonable chance" that house prices could end the year higher
than they started 2009.
Such an outcome was "unthinkable" a few months ago, the
Nationwide's chief economist said.
The Nationwide's latest house price survey showed prices rose by
1.3% in July compared with the previous month.
The average UK home costs £158,871, with the annual rate of
property value falls slowing sharply to 6.2%, it said.
The three-month on three-month comparison of property prices -
considered a less volatile measure than the monthly data - rose
from 1% in June to 2.6% in July.
This was the highest level seen since February 2007, when the
housing market was booming.
'Buyers' pool'
Property values in July were 6.2% lower than the same month a
year earlier, but this was a significant deceleration compared with
the 9.3% annual house price fall seen in June.
"House prices have been remarkably resilient so far this year,
despite a recessionary economic background with sharply rising
unemployment," said Martin Gahbauer, Nationwide's chief
economist.
This "correction" was a response to the sharp decline in
activity in the housing market at the height of the banking crisis
last autumn, he said.
Mr Gahbauer said there had been a pool of prospective buyers who
had been "ready and able" to buy during the credit crunch but had
been put off by the uncertainty in the economy.
When the worst of the crisis was over, or averted, these buyers
came back to the housing market, encouraged by low interest
rates.
The rise in demand and activity coincided with few properties
being put up for sale, and so prices bounced upwards, he said.
Lasting rise?
The rise in prices would be stunted owing to the squeeze on
earnings and rental income, and the rise in unemployment, he
warned.
"It is unlikely the price increases can be sustained for long at
the very strong rate observed over the last few months," he
said.
A rise in mortgage approvals for house purchases, revealed by
the Bank of England earlier in the week, signalled greater activity
in the housing market in the coming months.
In the short-term, the supply of homes for sale was determined
by issues such as consumer confidence and job security, but
construction was key over the long-term, said Mr Gahbauer.
An estimated 100,000 homes are being built in 2009, a record
low. This is far below the increase in the number of home-seekers,
owing to migration and greater life expectancy.
"Over time, these shortages are detrimental to housing
affordability and can contribute to future instability of prices,"
he said.
The Royal Institution of Chartered Surveyors (Rics) said that
the recent support for house prices was mainly down to a lack of
supply of properties.
"Whether they may be described as reluctant landlords or
investors, many homeowners wanting to move are hanging on to their
existing homes in the knowledge that servicing costs are low and
can be covered by rental income, even in an environment in which
yields are slipping," said Simon Rubinsohn, Rics chief
economist.
On Monday, the government announced that hundreds of housing
developments in England that had stalled during the recession were
set to share in a £925m attempt to kick-start the
industry.
About 270 projects could benefit from the cash, the government
said, with a third of the funds to go to housing associations to
build affordable homes.
source: www.bbc.co.uk/news 30th July
2009