Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/money/article/a614912
House prices make shock gain – largest since January 2010
Nationwide's house price index rose 1.3% in August, reversing the declines of the previous two months.
House prices made a shock gain of 1.3% in August, their largest monthly rise since January 2010.
According to the monthly Nationwide house price index the average price of a property increased to £164,729 from £164,384 in July. Although this equates to a seasonally adjusted 1.3% rise over the month – the largest monthly rise since January 2010 – prices are still 0.7% lower than they were a year ago.
Robert Gardner, Nationwide chief economist, said declines recorded in the past two months have been reversed, but one month’s data should not be relied upon.
‘Given the difficult economic backdrop, the extent of the rebound in August is a little surprising. However, we should never read too much into one month’s data, especially since monthly price changes have been impacted by a number of one-off factors this year, such as the ending of the stamp duty holiday for first-time buyers. These are factors that cannot be controlled by the usual process of seasonal adjustment.
Gardner added that conditions ‘remain fairly stable’.
‘This may be explained by the surprising resilience evident in the UK labour market, with further increases in employment in recent months, even though the UK economy has remained in recession.’
An increase in the housing market will be a ‘gradual process’ Nationwide said, although it expected housing transactions to pick up in the years ahead.
Policies such as the NewBuy scheme and Funding for Lending scheme will also help the housing market recover, but ultimately a recovery will depend on ‘developments in the labour market, increased job security, lower unemployment and stronger earnings growth’.
‘Though uncertain, a modest further improvement in affordability is likely, interest rates will not remain at current lows forever, but rate hikes still appear some way off,' Gardner said.
‘In addition house prices are expected to remain fairly stable over the next two years, while incomes are likely to continue to rise gradually, which will also help to support affordability.’
Despite Gardner’s positivity about the housing market, there is still a long way to go to reach the highs seen in 2005 to 2007. According to Nationwide figures monthly mortgage approvals for those years were on average 107,000 compared with 50,500 now, and the average deposit for a first-time buyer has increased from 10% to 20%.
The average house price in 2005 to 2007 was £167,860, compared with £164,729 now, although the average fixed-rate mortgage rate has dropped from 5.4% to 4.2%.
More about this:
More from us
- Olympics blamed for August house price slump
- House prices static in fragile market
- House prices 'relatively stable', government says
- Housing market 'still stuttering', surveyors say
- House prices down as sellers swamp buyers
- UK house prices rise, but market remains on a 'knife edge'
- 'Newbuy' mortgages launched to help first-time buyers
Tools from Citywire Money
From the Forums
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add email@example.com to your safe senders list so we don't get junked.
by Michelle McGagh on Dec 11, 2013 at 05:01