28th June 2013
House prices continued to rise in June jumping 0.3 per cent with London and the South-East still driving the upward momentum according to figures from Nationwide writes Philip Scott.
Prices had previously risen by 0.4 per cent in May, having been flat in April.
The year-on-year increase in house prices rose to 1.9 per cent this month – the largest annual increase since September 2010 and up from 1.1 per cent in May. The average UK home now has an average worth of £168,941, the highest level since July 2011.
However, this is still 9.2 per cent below the record high of £186,044 seen in October 2007. Howard Archer, chief UK & European economist at IHS Global Insight says: “House prices had fallen back from their October 2007 peak to be as low as £147.746 in February 2009.”
Significantly though, Nationwide pointed out that house prices in London are at a record high after the region has enjoyed the greatest recovery, and prices are now 5 per cent above their 2007 peak at £318,214.
Robert Gardner, Nationwide’s chief economist, adds: “A number of factors are likely to be contributing to the recent acceleration. Demand for homes has been supported by further modest gains in employment, as well as an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures, such as the Funding for Lending Scheme. Signs of a modest improvement in wider economic conditions may also be playing a role in boosting buyer sentiment.
“At the same time, there are few signs that the supply of housing is improving significantly. Indeed, construction data point to a further decline in building activity in recent quarters from already depressed levels.”
In the first three months of the year housing completions in England were down 8 per cent compared to the same period of 2012 and around 40 per cent below the average number of quarterly compattletions in 2007”.
Archer adds: “For the time being, we are sticking to our view that house prices will see solid but limited increases over the rest of 2013 and then strengthen more markedly in 2014. We believe that a strong upward move in house prices is unlikely for now given a still challenging and uncertain economic environment despite recent signs of improvement.
“In particular, very weak earnings growth argues against a substantial rise in house prices for the time being while consumer confidence is still limited compared to long-term norms despite the recent improvement. Housing market activity is also currently still limited compared to long-term norms despite the recent pick-up in activity. For example, while the BBA reported that mortgage approvals were at a 16-month high of 36,102 in May, this was only 66.5 per cent of the average monthly level of 54,320 seen since 1997.”