House prices see seventh monthly increase

House prices in the latest three months (June-August) were 2.1% higher than in the preceding three months (March-May). This was the same rate of increase as in both June and July, according to the latest Halifax House Price Index.

Related topics:  Mortgages
Amy Loddington
6th September 2013
Mortgages

Prices in the three months to August were 5.4% higher than in the same three months a year earlier. This was higher than July's 4.6% increase and is the highest annual rate since June 2010 (6.3%). The annual rate has picked up from 1.1% in March 2013.

House prices rose by 0.4% in August. This was the seventh consecutive monthly increase.
Activity has risen as well. The number of mortgage approvals for house purchases – a leading indicator of completed house sales – increased by 4% between June and July, to 60,600; the first time that approvals have exceeded 60,000 since early 2008. Approvals in the three months to July were 10% higher than in the preceding three months.

The relatively low level of mortgage payments in relation to income is supporting housing demand. Typical mortgage payments for a new borrower - both first-time buyers and homemovers – at the long-term average loan to value ratio, accounted for 27% of disposable earnings in 2013 Quarter 2; its lowest proportion since 1999 Quarter 2 and comfortably below the average of 36% over the past 30 years.

More properties are coming on to the market. Whilst demand has increased more quickly than supply, surveyors have reported a rise in the number of homeowners providing instructions in each of the last six months, according to RICS. Further improvements in the availability of properties for sales could help to bring demand and supply into better balance, constraining the upward pressure on prices.

Commenting, Martin Ellis, housing economist, said:

"House prices in the three months to August were 2.1% higher than in the previous three months;unchanged from both June and July. Prices in the three months to August were 5.4% higher than in the same three months last year, the highest annual rate since June 2010.

"Housing market activity is also on an upward trend with the number of mortgage approvals for house purchases – a leading indicator of completed house sales – 10% higher in the three months to July compared with the previous quarter after allowing for seasonal influences.

"Economic improvement and low interest rates, supported by official schemes such as Funding for Lending and Help to Buy, appear to have boosted housing demand in recent months. Nonetheless,relatively modest economic growth and below inflation rises in earnings are likely to act as a brake on the market. Overall, house prices are expected to rise gradually over the remainder of the year."

Nicholas Ayre, managing director of homebuying agency Home Fusion, says:

"Prices continue to rise but not as robustly as in the past few months, suggesting fears of a house price bubble are overstated. A bubble implies that people are buying anything at any price and they aren't. Buyers are being selective and sellers who are set on a certain price with little regard to what the market thinks the property is worth are struggling to sell.

"The Government may be keen for property prices to keep on rising but this will be a long, slow recovery. Much ground has been lost and transactions and lending levels are running at a fraction of what they were at the height of the housing boom. While it's useful to keep an eye on official numbers, ultimately it's about the buyer making their own call. Don't be too swayed by the fact that indices tell us prices are rising and end up panic buying in case you are priced out further. The buyer has to pay the mortgage and need to ensure they can afford it before taking the plunge.

"The problem we have is limited supply of housing: not enough is being built, which results in rising prices. Domestic demand remains strong but some of the bigger schemes are also being driven by offshore demand, and this is pushing prices higher still.

"In the past, buyers couldn't get access to funding and worried about losing their jobs; now there are more economic green shoots and people are feeling a bit more confident. Mortgage costs have fallen as a result of the government's Funding for Lending and Help to Buy schemes, and are likely to continue to do so."

Jonathan Hopper, managing director of property search consultants Garrington, says:

"A year ago the country was basking in Olympic glory - this summer the property market has felt a golden glow of buyer confidence. A better than expected summer for house sales should hopefully bode well for a strong September and October. On the ground, agents are seeing viewing numbers up and more committed buyers who are no longer afraid to take the plunge. Market activity is up, but not just because of renewed confidence on the part of the buyer. We have seen a noticeable rise in stock levels.

"But it's not just the number of new properties coming onto the market, the quality of new stock has improved markedly. Good quality properties are being snapped up in days, if not hours, particularly in London and the home counties. And we've even seen a return to the days of sealed bids for the best properties. What's encouraging is that we're now seeing more stock just below the top level also flying off the shelves. Where before these properties might have been sitting on the market for months, now they're finding buyers in weeks.

"There is definitely plenty of heat in the market. Whether that heat will turn into a burning furnace or blow itself out will be dependent on a number of factors - the continued support of the government, mortgage rates staying low and buyer appetite."

Ben Thompson, MD Legal & General Mortgage Club, said:

“Today’s figures clearly confirm that the market is continuing to gather pace and that the recovery is well and truly on track. At the moment that pace is sustainable especially when you consider the downturn we have had since 2007. However, the picture remains regional and patchy across the UK showing there is still work to be done in some areas.

The concern is that the market doesn’t overheat and that prices rising too quickly start to make the prospect of home ownership or moving into more suitable housing disappear into the distance for many people. Gentle house price growth over a number of years that is close to the level of inflation or even a little below it would be preferable as that would slowly bring a more sustainable balance to the housing market. Above all the best solution to housing affordability would be the widespread construction of suitable homes to increase supply and meet the undoubted demand.”

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