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Property demand remains strong as prices rise

Property demand remains strong as prices rise

Category: Mortgages

Updated: 05/06/2014
First Published: 05/06/2014

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 It is now over 6 months old so the content may be out of date.

The demand for UK housing is still growing, with house prices up 8.7% in the last three months to May compared to a year earlier, according to the Halifax House Price Index.

This figure is marginally higher than April's annual growth rate of 8.5%, while the index also showed that prices were 2.0% higher in the last three months (March to May) compared to the preceding three.

The quarterly outlook is the most reliable representation of trends, but it is also interesting to look at the monthly rise which reported an increase of 3.9%, leaving the average house price standing at a fresh high of £184,464.

As Stephen Noakes, mortgages director at Halifax, points out, housing demand is still strong, supported by a strengthening economy, while consumer confidence is being boosted by a rapidly improving jobs market and low interest rates.

Growth in new buyer enquiries has remained steady so far this year while the number of homeowners putting their property up for sale declined for the fourth consecutive month. Home sales edged down by 1% in April to 103,690, however they are still a third higher than in April 2013. Annually, sales grew to 1.142 million in the year to March 2014 – a rise of 23% from the same period a year earlier.

And there is still a growing difference between housing supply and demand which remains the key driver of price increases, as well as the creation of a possible housing bubble. However, housebuilding figures show signs of improvement which could help bring supply and demand into a better balance, with the number of private housing starts in England in the year to March 2014 increasing by 34% to 108,400 from a year earlier.

Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), comments: "An annual house price increase of 8.7% will be good news for second-steppers looking to climb the property ladder. Measured growth in house prices post-recession is good news, as it demonstrates the housing market is on its way to making a healthy recovery and prevents buyers from being stuck in an equity trap.

"However, this growth is likely to be skewed by the London property market, which is on its own unique trajectory. House price growth in the rest of the country is far more subdued, with ONS data indicating prices across the rest of the UK are still lower than they were pre-crisis.

"The root of London's rocketing house prices lies in a chronic shortage of suitable housing, as well as an increased injection of cash buyers into the market. Suggested solutions to limit mortgage lending, such as scaling back Help to Buy, will therefore do very little to solve this problem. The Government's attention must now turn to ramping up production of homes if they are to scale back the meteoric rise in prices in this region."

And the controversial Help 2 Buy Phase 2 looks here to stay, as in the Queen's speech at the opening of Parliament yesterday she announced that her "ministers will continue to promote the Help to Buy and Right to Buy schemes to support home ownership." So, with increased availability of high loan-to-value mortgages, perhaps now is the time to get your foot on the property ladder before those prices climb any further.

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