13th August 2013
UK house prices grew at their fastest pace since 2006 in July having delivered a fourth successive month of gains and the increase is being enjoyed in all parts of the country, not just in the south east writes Philip Scott.
According to the July’s Residential Market Survey from the Royal Institution of Chartered Surveyors (Rics), the increasingly upbeat mood in the market is being underpinned by the resurgence in new buyers.
Respondents to the survey now expect prices across the whole of the country, on average, to increase by 2 per cent over the coming year and by more than 4 per cent in each of the next five years. At the start of this year, the respective figures were 0.6 per cent and 3.4 per cent.
The Government’s Funding for Lending and Help-to-Buy schemes appear to be part of the reason for the pick-up in activity according to survey respondents. The former, in particular, has played a role in helping to improve mortgage availability; the survey suggests that surveyors perceive there has been a rise in typical loan-to-value ratios on offer for first-time buyers seeking a mortgage. In July, this may have risen to 83.6 per cent, which is two percentage points higher than at the end of last year.
Significantly, this growth was seen in each and every part of the UK as the recovery, initially focused in the South East, spread to regions across the country. The West Midlands and the North East, areas which have suffered more than most since the market crash, experienced the biggest increases in buyer activity in July.
Peter Bolton King, Rics global residential director says: “These results are great news for the property market as it looks like at long last a recovery could be around the corner. Growth in buyer numbers and prices have been happening in some parts of the country since the beginning of the year but this is the first time that everywhere has experienced some improvement. It is clearly good news that those parts of the property market that were struggling are at last showing some signs of life.”
Elsewhere the Office for National Statistics reported today that house prices rose 0.4% month-on-month in June, as they had done in May, which pushed the annual rate of increase up to 3.1 per cent from 2.9 per cent.).
The latest data from the trade body, the Council of Mortgage Lenders showed stronger mortgage advances for house purchases, especially to first-time buyers. It found that mortgage advances for house purchases amounted to 55,400 in June, which was up 1.1 per cent from May and up by 15.7 per cent year-on-year and advances to first-time buyers climbed to 25,300 in June, which was up by 30.4 per cent year-on-year and 4.1 per cent month-on-month.
Overall mortgage advances to first-time buyers in the second quarter was the strongest quarterly performance since 2007.
According to Howard Archer, chief UK and European Economist at consultancy, IHS Global Insight, it is looking ever more likely that house prices will see marked increases over the rest of 2013 and during 2014. Archer now predicts that house prices to rise by 3 per cent over the rest of this year and to then increase by 7 per cent in 2014.
He says: “Housing market activity has been trending up recently, supported by strengthening consumer confidence and elevated employment, and fueled by the Funding for Lending Scheme and the Help to Buy initiative. On top of this, the Bank of England has now indicated that interest rates are unlikely to rise before mid-2016, which seems likely to give many people greater confidence in their ability to purchase a house.
“With housing market activity likely to strengthen further, we expect house prices to gain momentum over the coming months. A shortage of properties is also likely to support house prices in some areas, notably London and the South East. However, we do not expect house prices to race ahead given likely extended low earnings growth and the fact that housing market activity is still substantially below pre-crisis levels.”