The five major UK house price indices show an average of 9.8% annualised growth for the twelve months prior to February 2007. This is a 0.4% decrease in the rate of growth from the previous month (10.2%) and a 5.7% increase since February 2006 (4.1%).
Growth in asking prices slows
Annual price gains continue heading into the spring, but the pace appears to be slowing. The Rightmove index showed the rate of growth in asking prices fall from 13.5% in January to 11.5% in February, an early indicator of a readjustment in asking price expectation from sellers. The shortage of properties on the market is continuing to drive prices up in the face of growing demand, which is set to continue for the foreseeable future while levels of housebuilding remain reasonably low.
The Bank offers a breather to homeowners
The Bank of England made absolutely the right decision in maintaining interest rates this month, with inflation currently under control and expected to come down sharply towards the end of the year. Wage demands appear to be under control and wage increases are likely to be contained at below 4% per annum by the end of the bargaining season. The robust condition of the property market has nothing to do with interest rates at their historically low levels and everything to do with lack of supply. Assetz believes that interest rates will peak at 5.25% and within 12 months will be back to 5%.
Average UK house price rises
The average house price, taken from the average price provided by all five major indices is £201,650, up from £200,628 in January. This shows an increase of £1,022 in the value of the average property in the last month and an increase of £18,362 in the twelve months from February 2006, when the average price of a home was £183,288.
Stuart Law, managing director of Assetz, commented: “The average price of a home in the UK has now broken through the £200,000 barrier, despite three interest rate rises since last August. This supports our belief that the market is driven by a shortage of homes and high demand from a growing population of potential homeowners. Rising income multiples are allowing more people to buy property despite rising prices, and the maintenance of interest rates this month at 5.25% will have boosted consumer confidence.
“With the rate of growth stabilising, the market is well set for continued steady growth as we head into the prime selling period and Assetz stands by its original prediction of 8 - 10% price rises in 2007.
“While homeowners are benefiting from gaining over £50 per day on the value of their home, first-time buyers are becoming increasingly ostracised from the lower end of the market, where they would have traditionally been able to find starter homes within their reach. Most first-time buyers in the south east now have little choice but to buy in groups or with help from their parents or otherwise benefit landlord by remaining as renters.”
