This was the third consecutive monthly increase and the fifth so far in 2009, reveals the Halifax House Price Index- September 2009 Commenting, Martin Ellis, housing economist, said:
"House prices increased by 1.6% in September; the third consecutive monthly increase and the fifth so far this year. House prices nationally have risen by 1.7% since the end of 2008. The combination of increased demand and a low level of properties available for sale has pushed up house prices in recent months. The marked improvement in affordability due to the reduction in both property prices and interest rates since mid 2007 has been a key factor in stimulating higher demand.
"Continuing increases in unemployment and low earnings growth are likely to constrain the rise in demand. There are also some signs that the improvement in market conditions is encouraging more people to put their properties up for sale. This development could loosen market conditions by alleviating the current shortage of supply and curb the pace of house price growth evident in recent months."
Key facts
- House prices rose by 1.6% in September. This was the third consecutive monthly increase and the fifth so far in 2009.
- House prices increased by 2.8% in Quarter 3. This was the first quarterly rise for two years (2007 Quarter 3) and the biggest since 2007 Quarter 1 (2.9%).
- The UK average house price in September was 1.7% (£2,672) higher than at the end of 2008. Prices have risen by 5.9% since reaching a trough in April 2009; an increase in the average price of just over £9,000. The national average price is currently at a similar level to that in mid 2005.
- House prices in September were 7.4% lower on an annual basis. The annual rate of change (measured by the average for the latest three months against the same period a year earlier) has fallen markedly from a low of -17.7% in April. It is at its lowest since June 2008 (-6.1%).
- The combination of increased demand and a low level of properties available for sale has pushed up house prices in recent months. The ratio of house sales to the stock of unsold properties on surveyors' book rose for the eighth successive month in August, indicating a tightening in market conditions, according to the latest RICS monthly survey.
- The proportion of disposable earnings devoted to mortgage payments has fallen significantly over the past two years. 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 2009 Quarter 3. This key measure of affordability is at a more favourable level than the average over the past 25 years (37%) and has been a major factor pushing up housing demand.
- Housing market activity has picked up in recent months but remains low on an historical basis. The number of house sales in England and Wales has increased during 2009 with the annual rate of decline improving from a low of -64% in November 2008 to -17% in June 2009, according to the Land Registry.
Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase, a leading indicator of completed house sales, has almost doubled from 27,400 in November 2008 to 52,300 in August 2009, on a seasonally adjusted basis. Approvals in August 2009, however, were 51% lower than in August 2007 (106,770).
David Brown, Commercial Director of LSL Property Services, comments:
“Here is another sign that the housing market is back on the right track- encouraging news for the wider economy. Increased demand and a substantial shortage of housing stock has pushed up house prices in consecutive months. Both buyers and sellers should rightly be feeling more confident in the market- but many remain frustrated.
"Difficulty in financing mortgages has meant that many frustrated buyers remain reliant on the rental sector. Whilst there are still fears of negative equity, house prices are affordable, cash-rich buyers and professional investors are well placed to take advantage of the current market.”
Paul Hunt, MD Phoebus Software, the mortgage-lender software supplier said:
“Coming on the back of the Nationwide stats, these figures look very positive. But prices are only half the housing narrative. Mortgage origination and the other satellite industries in the sector like estate agency are numbers games. The market relies on volume and there's another story to be told when it comes down to transactions.
The recent figures from the CML on gross lending showed this only too clearly, volumes down 37% year on year. OK, as house prices creep up, we can expect more homeowners to put their homes on the market. But as that happens, the supply-demand imbalance will be redressed, prices will begin to plateau, and we'll see this for the fillip it really is.”
Stuart Law, Chief Executive of Assetz, comments:
"The latest data from Halifax indicates how rapidly house prices are now improving. Over the last quarter prices on this index have risen by 3.6%, which is an annualised rate of over 15%. Whilst we consider this growth to be unsustainable over the medium term, it is important to note that Halifax has probably been holding back declared price growth over the last few months, using seasonal adjustments to a greater degree than its peer, Nationwide.
"For this reason we would expect the Halifax house price data to remain strong for the next six months as these adjustments are reversed back into their house price index. I fully expect to see positive annual growth from several of the major indices, including Halifax, by the end of the year, at which point mortgage lenders will feel a lot more secure in increasing the competitiveness of their deals.
"Improving mortgage availability and affordability will give further support to homebuyers, and contrary to other commentators; we do not expect any rise in unemployment to over-ride these positive factors.”
Nick Hopkinson, Director of Property Portfolio Rescue (PPR), said:
“As yet another monthly house price index heralds a housing market revival, the public could be forgiven for thinking that property prices are booming again. These monthly numbers simply reflect “cherry picked” lending to high earners with big deposits on prime property by the lenders concerned. House sales volumes are still at rock bottom and overall mortgage lending is falling, as any ordinary buyer will testify.
“The wider economic problems have not gone away, a dark grey cloud of rising unemployment, falling household income, tax rises and public service cuts looms on the horizon. Anyone wanting to sell their home should move fast before the harsh economic winter really sets in.”
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