There was seemingly good news for home owners when Halifax announced house prices had risen by 0.3% in July, boosting the average value of a property to £163,981.
Halifax also noted that prices were 0.5% higher over the three months from May to July than in the previous three months the first time Halifax had recorded this for 14 months. These findings certainly reflect our group’s experience and the average price of a property sold has been rising for several months.
But is it time to celebrate the renaissance of the housing market? Even Halifax’s index shows that over the preceding 12-month period, prices actually fell by 2.6%. At Connells, despite the price increases seen in recent months, we are finding that the average price of a property remains just under 13% below its peak in 2007.
In its latest house price index, Nationwide noted that prices in July edged up 0.2% compared with the previous month, but that over the past year they had dropped by 0.4%.
The Land Registry, with data based on completed transactions as opposed to mortgage approvals like the Nationwide and Halifax indices, recorded no change in June. It also saw an annual decrease of 2.5% for the 12 months to June, with the only area to buck this trend being London where prices rose by 0.8% over the year.
In general, the snapshot created by these reports is one of a market in limbo, despite the recent increases in price that have been recorded by some. One index’s increase in prices is offset by falls in another so it is difficult to draw definitive conclusions.
But it is also important not to get distracted by house prices alone. We have noted some encouraging trends in the market, including a 26% increase in mortgage applications compared with the first half of 2010 and 38% more mortgages signed up in June 2011 compared to June 2010. And our survey and valuations business has increased year-on-year up 47% on the same period in 2010.
Equally, over recent months we have seen a reduction in the obstacles that had prevented people from buying a home. The main one of these has been the greater availability of mortgage finance.
Lenders are rediscovering their appetite to lend and while finance is still restricted by comparison with early 2008, the market has opened up and lending criteria relaxed, with a wider choice of mortgages, especially for buy-to-let landlords and increasingly for first-time buyers.
First-timers have enjoyed a raft of incentives designed to get them on to the housing ladder. A number of lenders, including Skipton and Hinckley & Rugby building societies, NatWest and Northern Rock, have launched high LTV mortgages for this sector with loans available up to 95% LTV in some cases.
In addition, the government has launched FirstBuy and confirmed that Stamp Duty is not payable on purchases by first-time buyers where the property is valued under £250,000. We should also consider that many prospective purchasers had been disincentivised to purchase until now because it was cheaper to rent. But the growing number of would-be tenants has put pressure on limited stocks of rental properties which has caused rents to rise as landlords make the most of demand. The choice of rental properties has also become limited, with some reports of gazumping as tenants seek a suitable property.
The low base rate we are enjoying means that in some cases it is at least as cheap to buy as to rent, encouraging some first-time buyers into the world of property ownership.
Looking forward, it is clear that the residential property market has changed from the bubble environment of the early 2000s and buyers are now taking a long-term view of it.
First and foremost, many buyers are now seeing the property they buy as a home rather than the route to making a quick profit. Ownership offers an advantage over rental property in that it provides security of tenure not available if someone’s home is dependent on the decision of a landlord every six months on whether to sell or retain their rental property.
And let’s not forget that in the long term, housing still represents an excellent investment. Indeed, research by Savills has shown that with the exception of one decade, average property values have increased dramatically each decade for the past 50 years.
With the current shortage of housing and growing population, this is not a situation likely to change so those who can maintain their property ownership status in the long term are likely to make a profit.
Despite the overall negative house price figures over the past 12 months, property still represents a good investment over the long term as well as fulfilling its primary function in providing a home.