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House prices hit one-year high but rise is slowing
Sri Carmichael and Jonathan Prynn30.10.09
House prices are higher than they were a year ago for the first time since the start of the recession.
The dramatic recovery in the property market continued this month with a 0.4 per cent rise to a national average of £162,038, according to figures from the Nationwide. This is two per cent above the level of October last year.
However, the Nationwide warned that the recovery may already be fizzling out as the latest rise is much slower than in previous months.
It said this could reflect an increase in the numbers of sellers putting their homes up for sale in the autumn to take advantage of more buoyant market conditions.
The last time prices were showing year-on-year growth was in March 2008, just as the economy was sliding into recession.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “October's significantly reduced month-on-month increase fuels our suspicion that the recent rally in house prices is unsustainable and will fizzle out before long.”
He added: “Housing market activity is still at a low level despite improving in recent months, unemployment is high and still rising, earnings growth is low and still falling, and house price/earnings ratios are moving back up.”
The October price rise is the smallest since April, down from 0.9 per cent in September and 1.4 per cent in both July and August. But the average house price has now risen by 9.7 per cent from the February low of £147,746.
Competition for a limited number of properties has been pushing up prices.
Martin Gahbauer, Nationwide's chief economist, said: “A moderation in the rate of house price inflation was to be expected, as the very strong monthly increases seen over the summer months were unlikely to be sustainable over the long run.”
Mr Archer predicted house prices may rise slightly further but will be at least five per cent lower at the end of 2010 than they are now.
Today's housing figures come as a senior Treasury minister admitted Britain's economic recovery is not “completely locked in”.
Liam Byrne, the Chief Secretary to the Treasury, defended the Government's fiscal stimulus policy by stressing that the economy still needs a “lifeline”.
Reader views (10)
It continues to amaze me that the only economic indicator people seem concerned with is house prices. Our currency can tumble, unemployment can soar but as long as house prices keep rising then all is well.
Short-sighted dimwitted fools.
- Ben, Berkshire
House price growth is actually good but inline with inflaction or just there above to keep interest in the market up. Dull is good, which is why the comments on here rule
- A, London
Deluded in Luton.
Have you not heard we are still in trouble. Why does a small rise in house prices equate to your moron leader being labeled as a saviour in your small mind ?
- Joanna, london
house prices are linked to inflation in the long run, always have been. So if they are getting ahead especially when there is no inflation, its another bubble waiting to happen. The high house prices in the past were due to high inflation, this inflation is not there anymore, so there is no reason for house prices to rise, OH I forgot, we are running out of land, must buy, have to buy NOW. Save yourself a fortune, and stick to renting.
- Mike, London
It was Gordon Brown that pushed the banks to pass on rate cuts to borrowers"
And that is plainly a good thing, is it not, AW ?
- Keith Price, Luton England
they will drop in the end they always do
- Peter, Moscow RF
House prices going up - whoopeee.
- Frederick, London
How soon we forget: inflated house prices are one of the factors that got us into this recession in the first place. We should not be cheering their rise.
- Nobby Clark, Perth, the Scottish one
It was Gordon Brown that pushed the banks to pass on rate cuts to borrowers - more than 50% of mortgagees are enjoying signifacntly reduced mortgage payments and enjoying it.
If it were up to the banks - they would be charging us variable rates of 6%.
However - tightening mortgage lending will put further pressure on house prices. Those with 40% + deposit/equity can access the best deals in the marketplace in over 30 yrs.
VIVA LAS LONDON!!
- Ancient Wisdom, London, England
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
