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London homeowners were given a double boost today with two surveys pointing to a sharp recovery in prices.
Nationwide said prices rose 1.3 per cent this month and predicted that an acute shortage of houses could send prices soaring again in the next few years.
It said that they could even end the year higher than they started, a prospect that seemed “unthinkable” just a few months ago.
Estate agency Knight Frank said prices of homes in the capital worth more than £1 million went up 1.5 per cent this month, a fourth consecutive rise. It said demand from overseas buyers and a shortage of supply was continuing to push up prices.
The revival has been led by Kensington and Chelsea where prices are now six per cent higher than they were in March.
Nationwide warned that the seeds of the next housing boom are already been sown because so few homes are being built during the recession.
Only 100,000 homes will be built this year — the lowest number for at least two decades and the lender said building rates will remain low for a number of years because of the severity of the construction crisis.
With the Government expecting the number of households to grow by 250,000 a year through immigration and people living longer, it looks set to lead to a drastic shortage of supply.
Martin Gahbauer, chief economist at Nationwide, said: “As it is likely to take time for the economy and housing construction to recover to pre-crisis levels, the potential exists for a considerable housing shortfall to develop over the next few years.
“This would be on top of the shortfall that already started to develop in 2004, when even boom-time levels of construction failed to keep pace with household growth.
“Over time, however, these shortages are detrimental to housing affordability and can contribute to future instability in prices.”
The rise in the average UK house price this month took it to £158,871 and followed a one per cent rise in June. Prices are now 6.2 per cent lower than they were last year.
“There is now a reasonable chance that prices could end the year slightly higher than where they started. Only a few months ago, such an outcome would have appeared unthinkable,” said Mr Gahbauer.
However, he warned that the recession will act as a brake on the housing market in the short-term.
“One should not underestimate the impact over time of high unemployment, which has implications both for buyer confidence and the financial pressure on owners to sell,” he said.
Reader views (15)
Why are people still interested. Most people on this board probably own their home so shouldnt be interested. There should be a law like in Oz punishing people finacially who own numerous propertys who rent them out and keep supply low to people who want to buy. I can't get a mortgage but pay more a month than most people who have a mortgage. And whats the governments answer, keep letting the immigrants in to keep demand high and prices high for these greedy people who own more than one house, ministers included. makes me sick
- Dac - Ealing, London, 31/07/2009 09:19
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Martin, Clerkenwell - to simplify, Nu labour clearly hope to rely on the vote of their Nu clientelle - the feckless, the selfish and the greedy.
We need to get back to basics - self reliance and decency.
- Darius, London UK, 31/07/2009 08:03
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Sorry to disappoint all those who had been hoping to make a killing out of other people's hard work and sacrifice (i.e. those who expected to be able to bag a bargain)but house prices in London suburbs like mine are rising at far more than 1.5%. Evidence? We sold our detached at £601,000 'at the peak' in 2007, and a semi in our road has just gone for £610,000 - asking was £625,000. Good for us - since Gordo trashed our pensions and salaries, house equity is all we have.
- Liz, London,UK, 30/07/2009 17:14
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Why is it good news that house prices are going up? Is it so that homenowners can again borrow against any equity and we can start the whole sorry saga again? It is also reported today that the economy will still suffer for another year at least. Madness.
- Adrian, London., 30/07/2009 16:22
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In response to Darius - London
I am fascinated by the concept of a party that sets it's target market as Benefit addicts, multiple breeders (what are they? - Dog Breeders?) and property developers....no wonder Nu Labour are confused if that's their election strategy....
- Martin_Clerkenwell, london, 30/07/2009 14:46
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the figures are not reliable as turnover is low.
quite agree, however these are the same figures used to justify house price falls - all based on a tiny volume.
can't have your cake and eat it too...
- Scotty, london, 30/07/2009 14:02
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"when even boom-time levels of construction failed to keep pace with household growth"
Can we, therefore, forget this mad idea that the market will always provide? The market, in this case, has a direct incentive in keeping demand high and supply low, as it increases the selling price. Thus the market provides for property developers and estate agents, but for people who might want a roof over their heads, the market clearly doesn't provide, and thus we need Government to pull its finger out.
- Tom, London, UK, 30/07/2009 13:42
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Its funny how house price data is 'reliable' for house price bears when house prices head south, but when they turn north they are suddenly 'unreliable' and 'manufactured by vested interests!.
They do sound like very dull people.
- George, London, 30/07/2009 13:41
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Am I the only one to have spotted the vast squadron of flying pigs which swamped London's skyline this morning?
- Ted, London, 30/07/2009 13:14
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Richard Kennard has a point when he says that these figures are based on a low turnover and therefore not 100% reliable, nevertheless it's news that should be welcomed, rising house prices is the first indicator that confidence is returning and the worse of the recession is behind us. If we see the same confidence reflected in retail sales then it can only be a good thing for employment prospects.
- Nj, London, 30/07/2009 12:49
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Do not be fooled by this.House prices are still dropping.Do they really think that the people here in the UK are so stupid to believe that while house prices are dropping across the world,here in the UK a miricle has happend
- Dave, london, 30/07/2009 12:35
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More spin and waffle.
There must be a General Election in the offing.
- Reuben Camara, Republic of Morecambe, UK, 30/07/2009 08:30
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what is the point of house prices going up if nobody can afford to buy. is this a kind of psycology used to save sales?? I don't think this is going to help at all.
- Pat, London, 30/07/2009 08:26
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This just proves that interest rates have been too low for too long. This is by design.
NuLab want another house price boom - they hope to hold onto power next year by adding those who have made an obscene fortune out of property to their existing list of clientelle, made up largely of benefit addicts and multiple breeders.
The worrying thing is, it might just work.
With the vote next year split between the Tories and minority parties - leading the the worst of all worlds, a hung parliament.
We need decisive action on interest rates, for savers and first timers sake to curb and reduce house prices - or we would have learned nothing from the past 12 years of gross economic mismanagement.
- Darius Midwinter, London UK, 30/07/2009 07:51
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These figures are not reliable as turnover is so low; also they're provided by those with a vested interest in talking up the market. The underlying economic reality is dire: the reckless financial stimuli delivered by the incompetent Brown and Darling are, like adrenalin shots, wearing off and the patient is about to collapse again. Unemployment will soar and the pound come under intense pressure - you can't borrow your way out of debt.
- Richard Kennard, Welling, 30/07/2009 07:51
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