6th November 2013
House prices in October were 6.9% higher than in October last year according to the latest Halifax house price survey.
Prices in the three months to October were 1.6% higher than in the previous three months although this rate is below the increases of 2.0-2.1% recorded in each of the previous four months.
Commenting, Martin Ellis, housing economist, says: “Demand has increased this year, putting upward pressure on house prices and increasing levels of activity. Low interest rates, and higher consumer confidence supported by the increasing evidence that a sustainable economic recovery may now be underway, are helping to increase housing demand. Schemes, such as Funding for Lending and Help to Buy, also appear to have boosted demand.
“Despite increases in the past year both house prices and sales remain below the levels reached at the height of the last housing market cycle in 2006/2007. Sentiment towards selling has also improved in recent months in response to the pick-up in the market, which should help to increase the availability of properties on the market over the coming months.”
House prices increased by 0.7% in October, the ninth consecutive monthly increase, though it is still below the August 2007 peak.
Halifax says home sales during the July to September quarter were 21% higher than in the same three months last year.
The number of mortgage approvals for house purchases – a leading indicator of completed house sales – in the three months to September was 11% higher than in the previous quarter. (Source: Bank of England, seasonally-adjusted figures.) Activity, however, remains significantly below the levels recorded in 2006 and 2007 with sales in 2013 Quarter 3 still 36% lower than in 2006 Quarter 3.
Halifax says the low level of mortgage payments in relation to income is helping to boost 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 3; its lowest proportion since 1999 Quarter 2 and comfortably below the average of 36% over the past 30 years.
Joseph Murrock of online estate agent Wesold.co.uk says: “On the surface, this latest data from the Halifax will add to concerns of another house price bubble. The three-month growth figure may have slowed but the overall market continues to rise.
“But the fears of a bubble are being overplayed in many areas of the UK. In many areas of the UK, as the Halifax reminds us, house prices remain significantly below their 2007 peak. In some areas, they’re still falling. For anyone inside the M25, this is easily forgotten.
“London is at risk of overheating, few can realistically deny that, but what’s happening in the capital is hugely distorting the image of the broader UK market.
“If the recovery of the property market is to be sustainable, the supply of new houses needs to be addressed. This is especially the case in the capital. Where supply is constrained, the property market is like a leveraged trade. Its growth rate amplifies the real growth rate in the economy and underlying market conditions. If prices continue to rise in London, this will certainly need to be addressed, potentially via a new tax on foreign property investors”.