The Assetz House Price Watch reported the six major UK house price indices show an average of 9.7% annualised growth for the twelve months prior to November 2006. This is a 1% increase on the previous month (8.7%) and a 5.5% increase since the beginning of the year (4.2%).
No let up in house price growth
The shortage of homes is continuing to drive up prices as the end of the year nears. With the Rightmove index of asking prices showing an 12.4% growth in November, Assetz said it is possible to gain insight into the likely housing market trend of 2007 – continued strong growth.
Interest rates
The decision to raise interest rates to 5% at the start of November was not as clear-cut as many in the industry had anticipated, with two members voting against a rise.
This division within the Monetary Policy Committee (MPC), gives hope to the housing market that the Bank may refrain from raising rates again in the near future, even with what Assetz expects to be a delayed spike in Consumer Price Index (CPI) inflation to 2.7%. The admission by the Bank of England that inflation risk is a lot lower than they had previously suggested confirms the Assetz view that 5% is quite possibly the top of this cycle in rates.
Average UK house price rises
The average house price, taken from the average price provided by all six major indices is £198,147, up from £195,857 in October. This shows an increase of £2,290 in the value of the average property in the last month, and an increase of £16,857 in the 12 months from November 2005, when the average price of a home was £181,290.
Stuart Law, managing director of Assetz, commented: “This year has exceeded even our expectations in terms of house price growth, with London and the South East in particular suffering the most severe imbalance between supply and demand ever experienced.
“The much publicised bumper City bonuses this Christmas will fuel further meteoric growth in central London in 2007. Prestigious locations such as Mayfair and Belgravia are likely to become the scene for bidding wars between cash buyers from the UK and overseas, and have the potential to double in price over the next ten years.
“House price growth across the UK is set to reach between 8 – 10% in 2007 and quite possibly again in 2008, even allowing for the slight possibility of an additional interest rate rise in the spring. The growing demand for homes, driven by high immigration and the forthcoming expansion of the EU to include such countries as Bulgaria, Poland and Romania, will be the main source of this growth. While the Government is moving in the right direction by introducing PPS3 planning legislation to help increase the output of new homes, this is unlikely to check house price rises in the next few years.”
