28
Aug
House prices 'continue to rise'
UK house prices rose for the fourth month in a row during
August, the Nationwide has said, climbing by 1.6%. According to the
Nationwide, the average price of a home is now £160,224, up
from £158,871 in July. While prices are still lower than last
year, the annual rate of decline in property values slowed sharply
to 2.7%, compared with July's 6.2% fall. The Nationwide said a key
factor in lifting prices was "the exceptionally low level of
interest rates". Rates have been kept on hold at 0.5% by the Bank
of England since March.
'Bumpier' road ahead
The three-month on three-month comparison of property prices -
considered a less volatile measure than the monthly data - showed a
rise of 3.3% in August, up from 2.7% in July. Nationwide's chief
economist Martin Gahbauer said lower interest rates had given
existing homeowners with tracker or standard variable mortgages a
welcome breathing space. "The fall in debt serving costs has meant
that fewer homeowners are under immediate financial pressure to
sell than might have been expected in a recessionary economic
background with rising unemployment," he said.
Mr Gahbauer added that as a result, fewer second-hand properties
had come onto the market "than is normally the case in recessions",
which moved the balance of supply and demand "more in favour of
sellers over the course of 2009". At the same time, he said lower
interest rates had improved the affordability of mortgages for
first-time buyers. However, he cautioned that when interest rates
ultimately start to rise again as the wider economy recovers, the
strong house price increases of recent months "would become
difficult to sustain". "The eventual exit from exceptionally loose
monetary policy could make the recovery in the housing market
bumpier than some might expect after the last few months of price
increases," said Mr Gahbauer. However, Bank of England governor
Mervyn King recently implied that interest rates could remain low
for some months yet.
Reaction
Operators in the mortgage industry have also said that this is not
the start of another boom. "It is ironic that a strengthening of
the broader economy could lead to a weakening of the housing
market, which will in turn have a negative effect on the economy,"
said David Smith, of property consultancy Carter Jonas. "It is
encouraging to see such a rebound in prices, but bumpy recovery
could turn out to be quite some understatement." But Gary Smith,
president of the National Association of Estate Agents, said: "The
latest statistics from Nationwide appear to confirm that the
housing market has finally bottomed out and indications are that we
are hopefully moving to a point where the gradual recovery in
prices witnessed this year will be sustained. "As families now
begin to perceive that with realistic prices, historically low
interest rates together with the potential for capital growth, they
will upgrade and move through the system bringing their own houses
onto the market and boosting supply. "However to ensure these
aspirations are realised lenders have a huge role to play in the
coming months."
BBC News. (2009). House prices 'continue to rise'. Available
from: http://news.bbc.co.uk/1/hi/business/8223540.stm
Accessed 28th July 2009.