View more on these topics

House prices rising twice as fast as in 2003, says Rightmove

Rightmove has revealed that house prices are rising twice as fast as they were in 2003.

This increase follows large rises of 2.0% in March and 4.1% in February. Asking prices in the capital are up by 7.2% since January, compared with a slight decline of minus 0.2% last year.

Boroughs in the west of the capital have been recording the largest rises in asking prices this month, with Hounslow up by 6.7%, Hammersmith & Fulham up by 6.4%, Ealing 4.7%, Kingston-upon-Thames up 4.2%, Hillingdon up 3.2%, and Kensington & Chelsea and Harrow, both up 2.6%.

Only six boroughs saw declining prices, with 24 seeing rises. Camden recorded the largest fall, of 1.7%.

The surge in house prices since the end of 2003 with Rightmove&#39s April House Price Index showing asking prices up 2.8% this month, on top of increases of 2.9% in March and 2.1% in February.

The rate of house price inflation stands at 14.4%, up from a low of 9.1% in September 2003, while the average home is now worth 50% more than at the beginning of 2002, the date from which the Rightmove House Price Index is based.

Miles Shipside, commercial director of Rightmove, says: “The housing market is going with all guns blazing.

“Nationally, prices are far more buoyant than last year &#45 in fact they are rising twice as fast. This is mainly because the markets in London and the South-East have bounced back. Combined with sustained strength in other parts of the country, the overall picture looks pretty strong. At this rate, prices could rise in 2004 by over 20%, more than twice the 9.6% that was recorded last year.”

The 2.8% rise this month takes average prices from £179,570 in early March to £184,582 in early April.

Shipman adds: “Since the beginning of the year, prices have risen by 8% or £13,647, from £170,935 in early January to £184,582 now. That means they&#39re rising at the rate of £150 per day, which is tough for first time buyers trying to get onto the housing ladder.

“However, it&#39s good for existing homeowners sitting on an asset that is steadily growing in value. If you invested in a high interest savings account paying 4.5% gross &#45 3.6% net after basic rate tax &#45 you&#39d have to deposit more than a £1.5m to generate the same post-tax return.

“The average property is worth just under £185,000 &#45 an eighth as much &#45 so property is proving a much better investment at the moment.”

The annual rate of house price inflation, which had generally followed a downward trend throughout the first nine months of 2003, has steadily increased since December.

These renewed high levels of house price inflation beg the question as to whether the market is set for a crash.

Shipside continues: “Some commentators are suggesting that a sharp correction, similar to the one that occurred in the early 1990s, is now inevitable. Mistakenly, they look at the ratio of house prices to incomes and conclude that affordability of properties is becoming stretched and that prices will fall. What they need to look at is affordability of homes at current interest rate levels of around 5% or so.

“Clearly, a mortgage is much more affordable at 5% &#45 or even a bit higher if the MPC decides to raise rates &#45 than it was at between 10% and 15%, the levels that mortgage rates hit back at the beginning of the 1990s.

“Prices are being driven up by the availability of cheap borrowing as well as the shortage of stock on the market. It&#39s partly that estate agents are looking for new instructions from prospective vendors, and partly that we have an acute structural shortage of accommodation in this country.

“The government is starting to address the property shortage issue by releasing more land for affordable housing, but as Kate Barker says in her review, new build is unlikely to be sufficient to resolve the basic lack of homes. These factors mean that while house price rises should cool off as interest rates rise and homes become more expensive, there&#39s no likelihood of a collapse in prices. At the end of the day, we all need somewhere to live, and there aren&#39t enough homes to go round.”

Rightmove continues to record growing levels of activity in the market, with numbers of new instructions and properties coming off the market steady growing. Properties coming on the market are currently averaging 110,000 per month, while those coming off are around 125,000. All parts of the country have seen rising asking prices this month, with much stronger increases away from the South-East corner of England.


Exclusive: Thomas joins Opus

Paul Thomas, who quit as chief operating officer of Mortgages PLC on March 31, is joining the board of Opus Commercial as managing director. Mortgage Strategy exclusively revealed in December last year that Thomas, 48, was leaving the specialist lender. On joining Opus Commercial he is to take responsibility for turning the company&#39s commercial arm […]

PInk appoints BDM

Pink Home Loans has appointed Lisa Broomfield as business development manager for Scotland and Northern Ireland. Broomfield joins Pink from BM Solutions, where she held the position of business development manager for the same region. Previously, she worked for traded endowment company Beale Dobie and for Legal & General as a business development manager for […]

UCB Home Loans hikes fixed rates

UCB Home Loans is increasing some of its fixed mortgage interest rates to reflect recent movements in the money markets. The rates are available from April 16 2004. The self-cert two-year fixed rate has increased by 0.30% to 5.59%, 6.5% APR; the self-cert three-year fixed rate by 0.20% to 5.69% and the buy-to-let two-year fixed […]

DA figures on track to exceed expectations

The Mortgage Code Compliance Board has indicated that the number of brokers opting for direct authorisation will be almost double the FSA&#39s original anticipated figure of 7,000. Brad Baker, head of communications at the MCCB, tells Mortgage Strategy that the board expects the majority of brokers to take the DA route rather than join networks. […]

Health - thumbnail

Absence management systems gone AWOL from UK’s SMEs, reports Jelf

A quarter (23 per cent)* of the UK’s small to medium-sized enterprises (SMEs) do not have an absence management system in place, according to new research from Jelf Employee Benefits. Despite 69 per cent* of organisations having a system in place, three-quarters (75 per cent) report that it is not providing them with sufficiently empowering absence or health data to inform an effective wellbeing programme.


News and expert analysis straight to your inbox

Sign up