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Is the housing market stabilising?

Is the housing market stabilising?

Category: Mortgages

Updated: 10/10/2014
First Published: 10/10/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It's a bit of a murky picture for the housing market at the moment. While some reports herald a recovery from the summer slump, others suggest that it's heading for a further slowdown. Brought together, it would appear that the market is on course to become more stable as we head into next year, but take a look at the latest findings and decide for yourself…

House price growth: signs of moderation

According to figures from LSL, house price growth is showing further signs of moderation. Despite prices rising by 10.6% year-on-year - putting the typical UK home at £275,820 - on a monthly basis they increased by just 0.5%. This is the slowest rate of monthly growth since November 2013, and the annual rate has also fallen - August recorded a growth rate of 10.7% - marking the first annual decline since May 2013.

Both of these factors could indicate a possible slowdown in house price inflation, particularly when taking geographical variations into account. The report noted that the market continued to be skewed by London and the South East, with only four UK regions having surpassed their pre-crisis peak and a clear north/south divide remaining - in the North, for example, prices are still 8.3% below those seen in 2008.

Inflation itself has a lot to answer for too, and after taking it into account, it's only prices in London that have actually increased, in real terms, since the financial crisis. David Newnes, of Reeds Rains and Your Move, said that activity in the market was still vibrant but is adapting to a "mellower beat", with September seeing the lowest monthly increase in property prices so far this year "as a new spell of market adjustment sets in for the autumn".

So, it would seem as though the market is heading towards a more stable trajectory, at least from a house price perspective. This follows a report from Halifax earlier this week which suggested that house price growth had peaked, so fears of heading into bubble territory appear to be unfounded.

House purchase approvals: moderate recovery

The volume of house purchase approvals – in other words, the number of people who were accepted for a mortgage – displayed moderate recovery last month, the latest e.surv Mortgage Monitor has revealed, with monthly approvals rising by 2% between August and September.

There were a total of 65,469 house purchase approvals granted over the month – up from August's figure of 64,212 – the first monthly growth in approvals since June, following declines in both July (-1.2%) and August (-2.9%).

So, here we have signs of a modest seasonal recovery, but looking further back paints a different picture. On an annual basis, the number of approvals has actually fallen – they fell by 1.8% in September, marking the first annual drop since 2008, which suggests that although approvals are rising, they're not approaching the heady levels seen at the height of the recovery. "The road looks steady," said e.surv's Richard Sexton, another positive indication of growing stability.

House purchase lending: down 3%

Mortgage approvals are one thing, but actually handing out the money is another set of figures entirely – and house purchase lending appears to be slowing. Figures from the Council of Mortgage Lenders (CML) show that house purchase lending declined slightly in August, totalling 65,400 mortgages over the month - a drop of 3% from July. The value of those loans also decreased, totalling £11.4bn, another 3% monthly drop.

However, on an annual basis both the number and value of those loans increased, rising by 8% and 19% respectively, so the picture is, again, a fuzzy one. Most sectors of the market displayed a similar pattern, with only the remortgage sector seeing both monthly and annual drops in mortgage lending figures.

Overall, the pattern could indicate a levelling off of the market, yet the outlook remains positive. Again, the figures support the notion of stability, with the market appearing to be well away from the risk of a bubble.

Valuations: autumn rebound

Getting a valuation carried out on your property (and your prospective new home) is a core part of the buying and selling process, and the number of valuations that take place is a key indicator of the level of activity in the market as a whole.

Well, September 2014 saw a monthly rebound in valuations activity, according to figures from Connells Survey & Valuation, with the total number of valuations conducted in the month increasing by 42% compared with August. However, this was not enough of a seasonal rebound to take valuation volumes ahead of September 2013 – on an annual basis, the number of valuations dropped by 12%, mirroring the activity seen elsewhere in the market.

John Bagshaw, of Connells Survey & Valuation, commented: "Sustainability is the new watchword for the housing market. Higher interest rates are getting closer and caps on mortgage to income ratios officially come into force this month – both closely following MMR, which has now become a settled feature of the landscape. Buyers and sellers are increasingly factoring in slightly higher interest costs and a potential slowdown in house price growth.

"Steadier progress isn't necessarily bad news. Autumn last year was exceptionally good for housing market activity. Now, as the UK searches for a long-lost measure of normality, the housing market is displaying sensible levels of caution – a healthy and often life-preserving characteristic. Stability will be important as activity keeps growing into 2015."

All in all, it appears to be good news for the market as a whole. No-one wants it to head towards pre-crisis levels of un-sustainability, and by all accounts, that's not on the horizon. House price growth is moderating, a trend mirrored when looking at other factors, and it looks as though a period of stable, sustainable recovery is in play.

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