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House prices edge towards 2007 peak

House prices edge towards 2007 peak

Category: Mortgages

Updated: 03/06/2010
First Published: 03/06/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
House prices continue to rise and are edging ever closer to their 2007 peak, before the market was brought to its knees.

An upward monthly motion of 0.5% in May saw the average house price in the UK rise from £167,802 to £169,162, figures from Nationwide show.

This latest increase means that house prices have registered an annual rise of 10.5%.

These latest movements have seen average prices move to within 9.5% of the peak seen in October 2007. If the annual rate of change continues at its current level, prices will move past the previous high within the next 12 months.

Martin Gahbauer, chief economist at the building society, said that the conditions in the housing market were characterised by small transaction volumes and a scarcity of property for sale.

"The current supply-demand balance on the market is still consistent with relatively stable to modestly upward trending prices," he added.

Mr. Gahbauer also said that the forthcoming implementation of a higher rate of Capital Gains Tax (CGT) could slow the rise of house prices.

The coalition Government recently announced that it planned to increase CGT from 18% to a level similar or close to that applied on income, meaning profits made on second homes and other non-business assets would be taxed at a markedly higher level.

"If there is a significant time lag between the announcement of the increase and the actual implementation, then some second homeowners and buy-to-let landlords may decide to sell in advance of the higher rate being introduced.

"Such a development could lead the supply-demand balance to shift more in favour of buyers and relieve the current upward pressure on house prices."

The news that house prices continue in an upward trajectory will come as good news to some but potential first time buyers (FTBs) are unlikely to be celebrating.

A recent survey of advisers by NatWest Intermediary Solutions found that the biggest hurdle faced by FTBs trying to gain a foothold on the property ladder was raising a deposit.

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