The Price Watch is a summary of the five major UK house price indices and showed the average house price rose from £198,888 in December to £199,451 in January.
The five indices showed an average of 9.9% annualised growth for the twelve months prior to January 2007. This is a 0.1% decrease on the previous month (10%) and a 5.7% increase since January 2006 (4.2%).
Annual growth stabilises
The rate of house price growth remains strong at 9.9% and is likely to plateau at around this level. With strong employment, high immigration and low levels of housebuilding, demand continues to outstrip supply. London leads the market with meteoric growth in the prime central locations of Belgravia, Knightsbridge and Mayfair. Assetz still predicts growth of 8-10% for 2007. Rightmove data shows sellers asking increasingly strong prices for new listings and this is likely to underpin strength in the market this year.
Interest rates
In maintaining rates in February, the Bank of England has recognised that the risks to inflation are under control, and the Consumer Price Index has dropped back from 3% last month to 2.7% in February, a significant fall which was expected. Inflation is set to lower significantly towards the end of the year back towards 2% and wage demands also appear to be under control, which will become clear at the end of the main wage bargaining season in two months. Assetz believes further interest rate rises are unjustified and expects rates to revert back to 5% in due course, probably by the year-end. Property price inflation is still being driven by excess demand over supply, which is likely to continue for many years to come.
Average UK house price rises
The average house price, taken from the average price provided by all five major indices is £199,451, up from £198,888 in December. This shows an increase of £563 in the value of the average property in the last month, but an increase of £ 17,388 in the twelve months from January 2006, when the average price of a home was £182,063.
Stuart Law, managing director of Assetz, commented: “Growth remains at an impressive 9.9% and the rate of growth is starting to stabilise. With the demand for homes in the UK continuing to vastly outstrip supply, prices are well positioned for continued robust growth throughout 2007. If the MPC were to inflict another rate rise on consumers it would cause a modest hike in repossessions while doing little to restrain house price growth in the long term.
“The average price of a new home is now almost £200,000, well out of reach of many first-time buyers who are left with little choice but to continue renting or buy with parental assistance. Young people today are the first generation to be considerably worse off financially than their parents, so we will see more people in their fifties and sixties releasing equity from their homes to help their children onto the housing ladder or enjoy their own retirement, perhaps even investing in a holiday home overseas.”
