House Price Update to 21 October 2009

UK House Prices Situation: Increases recorded in all areas during Q3

UK House Prices Forecast: Continued growth likely to be curtailed in New Year

All Regions See Growth in Q3

According to Nationwide’s house price report for the third quarter of 2009, all regions of the UK saw an increase in average house prices during this time. House prices rose by an average of 3.7% in the third quarter, bringing the average annual rate of change to -3%. This represents a considerable improvement on the second quarter, when the annual rate of change was -11.7%.

Nationwide’s Chief Economist, Martin Gahbauer, noted that house price expectations “have risen considerably since the start of the year.” He pointed out that in January, 60% of consumers expected to prices fall over the next six months – by August, that figure was just 16%.

However, Gahbauer sounded a note of caution when observing that house price expectations have been rising faster than transaction levels – suggesting that “rising unemployment and tighter credit conditions” may still be “constraining the pace of recovery in transactions”.

The FSA’s proposed tighter regulations on mortgage lending could also result in a slowing of the market.

Rightmove October Figures Show 2.8% Monthly Rise

Property website Rightmove has just published new figures showing that average asking prices in England and Wales rose by 2.8% in October 2009. This means that the average annual rate of change has now reached positive territory again, with average asking prices having risen by +0.2% over the last year.

Rightmove’s Miles Shipside notes that there are a number of factors that may slow down this rate of increase in the next year:

- Pre-election uncertainty and post-election fiscal tightening
- The end of the Stamp Duty holiday and the scheduled increase in VAT on January 1st, 2010
- The possibility that a new government might change the rules on HIPs, tempting potential sellers to wait and see if they can avoid preparing a HIP

The combined effect of all of these factors could “stamp out the early stages of a housing market recovery”, according to Shipside, who notes that sellers should “watch out for icy conditions” early next year.

Read about UK House Price indexes / key statistics that track the ups and downs of house prices

Read our take on the Credit Crisis the effect on UK House Prices and Mortgages. A Special Report

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