House prices in July were 4.9% higher on an annual basis as measured by the average for the latest three months against the same period a year earlier. This was below the 6.3% increase in June and compares with a recent high of 6.9% in May.
Prices in July were marginally (0.8%) lower than at the end of 2009 but are 8.3% above their April 2009 trough. The average house price is now 167,425; 16% below its August 2007 peak.
Housing market activity broadly stable. Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase in the three months to June a leading indicator of completed house sales were modestly (2%) higher than in the previous quarter, on a seasonally adjusted basis. Activity remains significantly lower than a few years ago with approvals 56% lower in 2010 Quarter 2 compared with 2007 Quarter 2.
Low mortgage rates have reduced the burden of servicing mortgage debt. Nationally, typical mortgage payments for a new borrower have fallen from a peak of 48% of average disposable earnings in 2007 Quarter 3 to 30% in 2010 Quarter 2.
This key measure of affordability is at a more favourable level than the long-term average over the past 25 years (37%) and is a key factor supporting housing demand.
In separate research to be released later this week, Halifax has found that the total value of privately owned housing stock in the UK more than doubled over the past decade. There was a 118% increase from 1,719 billion in 1999 to an estimated 3,755 billion in 2009.
During the same period, the retail price index rose by 29%. However, since 2007 the value of housing stock in the UK has declined by 8%. This reflects the reduction in house prices between mid 2007 and early 2009. The improvement in house prices in 2009 saw housing value grow by an estimated 2% during the year.
Commenting, Martin Ellis, housing economist, said:
"House prices increased by 0.6% in July, reversing the fall in June. Overall, there has been little change in prices during 2010 so far. The mixed pattern of monthly rises and falls over the first seven months of the year is consistent with a slowing market. It is also in line with our view that house prices will be broadly unchanged over 2010 as a whole.
"The increase in the number of properties for sale over the past few months, boosted by the recent abolition of HIPs, has relieved much of the pressure that was driving up prices in 2009. Low interest rates and a recovering economy, however, are underpinning demand and continue to support the market."
Jonathan Moore, director of easyroommate.co.uk comments:
House prices have fluctuated over the past couple of months a sure sign of the fragility of the markets recovery. The surging supply of properties hitting the market following the abolition of HIPs has counterbalanced the strong demand from the thousands of buyers hoping to take advantage of low interest rates.
"But would-be first-time buyers are still being priced out of the market. Halifax estimates a house is 4.75 times the average first-timers wage and thats for those lucky few who can get a mortgage. On top of unaffordable house prices, many buyers cannot provide the huge deposits lenders require.
"Affordable, achievable mortgage finance remains key to re-igniting the recovery, and unlocking the first-time buyer market. Flatsharing offers the thousands of frustrated buyers the chance to save on monthly bills and rent while they squirrel away enough cash to put towards their own house purchase.
