David Brown, commercial director of LSL Property Services comments:
“Static house prices don’t mean property values are standing still. For buyers looking to get onto the market, 0% price growth means that in real terms property is becoming more affordable. With inflation running at 5%, the real cost of property is getting smaller and smaller, which is good news for buyers and mortgage borrowers alike.
“The resilience of property prices indicates that mortgage lenders and property buyers have not so far been spooked by the gloomy news emerging from the Eurozone. Although prices have declined by 0.7% since November 2010, the rate of annual price decreases slowed everywhere except the North West and the East Midlands, with London - buoyed by foreign investors seeking a safe haven in the capital’s bricks and mortar - showing an acceleration in price rises to 3.1% last month.
"Low mortgage rates, along with the stamp duty holiday on properties below £250,000 and the modest boost provided by the government’s FirstBuy scheme, have all contributed to prevent larger falls in 2011.
“According to the Council of Mortgage Lenders, mortgage lending increased 9.8% in the year to October and has risen for the last three consecutive months for the first time since the summer of 2007, which has contributed to the 4.5% rise in transactions seen last month. However, we’re yet to see any significant decrease in the size of the deposits lenders require. Among buyers who have substantial deposits, demand remains strong and the rise in mortgage volumes suggests many people in this position are taking the opportunity to secure good properties while mortgage finance and property prices make purchasing a more and more affordable option.”
Dr Peter Williams, housing market specialist and Chairman of Acadametrics, comments:
“On the basis of monthly change, house prices in November stood still. The average price in England & Wales now stands at £220,043, only £7 less than the average in October. The current average is £19,808, or 9.9%, above the price at the April 2009 trough of the last housing recession, but £11,785, or 5.1%, below the price peak of £231,828, recorded in February 2008. The relative stability in prices over the last two years is indicated, too, by our house price Index which stands, this month, at 224.0 and is virtually unchanged from the 223.9 index at January 2010.
"Since March 2010, there have, in fact, been only two months in which house prices have changed by 1% or more. However, these months (April and May this year) reflected the end March change to stamp duty levels, rather than fundamental movements in the housing markets. Nevertheless, as we show later in this report, the steady average house price for the country as a whole masks the very different patterns that currently exist at regional and county levels.
“Over the last twelve months, year on year house prices in England & Wales have fallen by -0.7%, suggesting a further slowing in the rate of annual decline from the -2.2% fall seen in June 2011. Figure 4 shows the annual house price growth for each of the regions in England & Wales over the last three months and demonstrates that house prices are falling in all regions except for Greater London. But Figure 4 also shows that there has been a reduction in the rate of annual decline of house prices in all regions except the North West.
"Last month, we were reporting the opposite trend, with all regions witnessing bigger falls in house prices on an annual basis, except for the West Midlands and Greater London. This latest shift goes against almost all the housing analysts predictions, ourselves included, and suggests that the outcome for the housing market in 2011 is likely to be closer to a fall of around -1.0%, against our earlier predictions of -2.5%. This is good news for existing owners and even for those buyers in a position to purchase who can feel more confident about entering the market.
“All recent economic news and commentary has been negative regarding future prospects - too negative, some now suggest. Indeed, our commentary shows that the housing market in 2011 has performed better than expected - low interest rates and support for borrowers in difficulty have played their part.
"Going forward, the latest Bank of England Financial Stability report issued on 1st December commented that ‘forward looking indicators of housing market activity have remained weak’ while the Office for Budget Responsibility Economic and Fiscal Outlook published at the end of November suggested that house prices would fall slightly in 2012 and that transactions would remain subdued.
"Underpinning both sets of commentary is a recognition of tighter credit conditions and a lack of consumer confidence and capacity. David Miles, an external member of the Bank’s Monetary Policy Committee, set out in a recent speech the view that the housing market was in transition and that it might ‘never look quite the same again’.
This followed similar comments by Charlie Bean, earlier in the month. As we write, Andy Haldane, Director of Financial Stability at the Bank, has warned of funding difficulties for banks. If these result in higher interest rates and fewer mortgages, the housing market will most certainly be affected.
"Major change is underway in the housing market but it is important not to let this lead to a view the new world might be unrecognisable. Although there will be more renters, home ownership will remain the dominant tenure and there will be a continued flow of households onto the housing ladder. Households will continue to move reflecting job and personal circumstances. Perhaps the big unknowns at this stage are the likely output of new homes and the flow of mortgage finance.
"The c
