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The housing market showed further signs of life today as prices rose again and the central London market rebounded strongly.
Mortgage lender Nationwide said average house prices in the UK ticked up 1.6% in August, the fourth increase in a row and the biggest since the start of the slump two years ago.
Prices are now just 2.7% below where they were a year ago and 8% higher than they were in February.
However, they are still 14% below the peak of October 2007.
Upmarket estate agent Savills said there had been a particularly strong recovery in the London market in recent months following a slow start to the year.
“We had a very quiet first quarter but a much more active second quarter,” said Savills chief executive Jeremy Helsby.
“It has been particularly focused on London and the south-east, much more so than the rest of the country.”
Savills, which specialises in expensive homes, said average selling prices in London in the first half were just 6% down on the same period last year at £2.25 million.
A survey by Rightmove last week showed that despite the rise in UK prices average prices in the capital were 3.8% lower this month than in July at £387,265.
Helsby said in recent months the London market has been “frothy” due to a lack of stock and growing levels of demand among cash-rich buyers.
But he cautioned: “Whether prices will continue to rise is open to debate. For 2010 we predict prices to be flat and then in 2011 prices will start rising again.”
He said 55% of buyers in London were from overseas, in particular from Europe but also from Russia and the Middle East.
“Sterling has been weak and prices have been falling so for overseas buyers London property prices have fallen by about 50%,” he said.
Nationwide said the average UK house price was now £160,224. Chief economist Martin Gahbauer said: “The exceptionally low level of interest rates offers some explanation for why house prices have not repeated the very sharp falls of 2008.”
But he warned that when interest rates did start to rise again it could make the recovery in the housing market “bumpier” than might be expected following the recent run of price rises.
David Smith, senior partner of property consultancy Carter Jonas, said rate rises could force many people to sell at the same time as sapping demand among buyers.
He said: “The combination of increased supply and reduced demand will be toxic for the property market…bumpy recovery could turn out to be quite some understatement.”
Reader views (15)
Will the real Keith Price please stand up.
- Dan Dan, Sydney (ExPat), 28/08/2009 03:52
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When the laws of gravity or any law are defied it will come to a point where reality returns. I hope the market is taking off but I think its a very short term blip. Look at any chart on the way down there are constant blips uop then down it goes. This is like that. Ask yourself this question? How can houses go up if huge swathes of the population are loosing their jobs and businesses?? This is and election thing. They have pumped £billions in to make it happen, but clearly it is not sustainable.
- Jas, Camberley UK, 27/08/2009 20:46
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The copy and paste comments continue, I see - along with a failure to grasp reality. The clutching at insubstantial straws as shown by a few of the regular Socialist apologists here seems to completely ignore what is stated in the article about foreign buyers cashing in on, for them, cheap property; of the "frothy" improvements being principally in the SE and still below the claims by the government; of the continuation of the Quantitative Easing mentioned in the presumed authorative comment of Michael White meaning that not only have the prices become more attractive to those WITH money, but that ultimately the money in your pocket is now worth less!
Improvement? Sure.....
Suspension of belief is an integral part of reading any work of fiction. Ask any socialist in today's Britain.
- Rogan, Irving, 27/08/2009 19:36
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A question for Michael White - If these reports of rising house prices are sustained and proven do you think the BoE will be forced to consider raising the Base Rate?
After all, house prices are reportedly rising faster than both inflation and salaries, and prices are higher than historic multiples and higher than far too many people can afford.
- Tim, London, UK, 27/08/2009 19:02
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Re Keith Price. Was it Goebbels who said if you repeat the same lie often enough, people will believe it; or was it Tony Blair or Gordon Brown?
- Ronold, London U.K, 27/08/2009 18:14
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Isn't this a country, which it is said, the population believe anything it's told. Ha! Ha! Ha!
- Baz, London UK, 27/08/2009 16:00
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God the majority of people in this country are stupid for first thinking that a high cost of housing is a good thing and for believing everything they read in the press. House prices may have bounced somewhat on a collapse in liquidity and interest rates at record lows but this is absolutely not sustainable and the downward trend will continue come the autumn.
- Dr Whooligan,, London, 27/08/2009 14:26
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Michael your comments are just trying to talk up the market up with a 'reallistic spin' on it. House prices in London appear to be rising because of the time of year,low volumes, the cheap £ and low interest rates.
These factors don't form the basis of a solid foundation for steadying house prices, it's just a breather for now, rising unemployment in the mix will surely add more downward pressure.
- Mattk, Ware, 27/08/2009 13:23
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Are people seriously saying that the UK is coming out of a recession because someone said house prices are going up? Seriously? There aren't enough property sales in such a badly deflated market to make a decent judgement call on price rises based on postcode and property type cross referenced to prices prior to the crash, let alone to make a call on the entire state of the economy.
- Bob, Cheam, 27/08/2009 12:57
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1. This increase was "SEASONAL".
2. Let the winters start and we will find out the truth.
3. Over 4 million unemployed in UK (And rising)...don't think the housing has much further to go !!!
- R.Minto, London, 27/08/2009 12:57
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So, house prices going up is good! Strange place the UK.
- Never Eat Tuna Again, London, 27/08/2009 11:57
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Well done Gordon Brown for rescuing the country from the worldwide economic recession, which has hit many other countries far harder than it has us here in the UK
- Keith Price, Luton England, 27/08/2009 11:32
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So the worst is over,and things are getting slightly better,what terrible news, I suppose this means we will have to stop talking our country down,such a shame.
- Colin, Bristol, 27/08/2009 11:31
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You have to give it up for Gordon. He came good in the end. Now, stop your bickering and vote Labour at the next election.
- Peace Maker, Battersea, 27/08/2009 10:29
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This 1.6% increase in average UK house prices reported today maintains the Nationwide’s theme of recent months and reflects the improved sentiment continuing to support the market. We have now seen house price increases reported by the Nationwide throughout the Summer months, however this is still based on a period of historically low transactional volumes.
The cautious optimism has continued with The British Bankers' Association (BBA) revealing approvals amongst the high-street banks in July stood at 38,181, a rise of 7.4 per cent compared with June and 77 per cent higher than a year ago.
More positively, the momentum of this still fragile recovery is now unlikely to be hampered by rising interest rates in the near future. This follows commentary from the Bank of England which, following the surprise decision to increase the Quantitative Easing programme, said inflation would probably fall sharply later this year and still undershoot the Bank's 2% target if borrowing costs rose in line with market expectations. Essentially this was a clear signal that Base Rate will stay at its record low of 0.5% for a lot longer than many had been anticipating.
The worst may indeed be over but it seems clear that the current situation, with the mortgage market still crying out for more competition and product choice, is likely to be the status quo for some time as we continue to bump along the tail of the recession for an extended period.
- Michael White Ceo Email Mortgages, London, England, 27/08/2009 09:53
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