The annual increase in house prices broke the 10% barrier as it climbed almost 3% from January to hit 11.23% in February, compared with an average of 8% over the past nine months
Welcome return of the first time buyer
The percentage of sales to first time buyers reached 20%, its highest level for almost a year. Although not at the previous dizzy heights of 25 – 30%, this increase starts to dispel fears that they are a fast disappearing breed.
Activity was up on all fronts, as sales, instructions and enquiries all reached their highest levels for several months, and pipelines of new business were also strong.
Buyer competition as demand strengthens
Demand increased in February 2004 as the average agency recorded over 600 homebuyers on its books, resulting in a strong market for sellers who on average achieved 97% of their asking price. The pace of transactions also sped up and the number of weeks between instruction and sale dropped to the lowest level for twelve months (5.8 weeks).
Strong market unfazed by interest rate threats…
These statistics combine to paint a picture of a strong market that can withstand further small increases in interest rates. Almost 90% of estate agents believe that a 1% increase in rates will only marginally reduce house prices, contrasting sharply with the potential effects or similar increases in stamp duty and capital gains tax.
...but Chancellor jeopardises market strength
Although indicators point to a surging market in the months ahead, prices and activity could be severely affected by impending fears of stamp duty increases and the extension of capital gains tax regulations to primary residences.
An overwhelming 100% of agents surveyed believe that further hikes in stamp duty could seriously dampen house prices, with unanimity that a 1% rise would cause immediate decreases in price. A staggering 41.3% of agents expect these decreases to be well over 5%.
Worse fears are haunting estate agents in relation to capital gains tax, with almost two thirds (64.7%) expecting decreases of at least 5% and a quarter (25.88%) fearing prices will drop by over 10%.
Melfyn Williams, President of the NAEA, said: “This month’s survey shows that the housing market has rebounded to healthy levels not seen for a year. First time buyers are making a tentative comeback into the market as activity and demand increases.
“However, despite its buoyancy, the market is by no means the runaway train of a housing boom and the market could be ‘hit for six’ if the Chancellor is foolish enough to impose stamp duty increases in Wednesday’s Budget.”
