UK Property Investment Blog

More positive news flows out about the UK property market.

From David Smith’s column in the Sunday Times:

“An important milestone has been passed with the Nationwide building society’s report last week that house prices are back at the levels of a year ago. It has been heading that way for some time — the low point for prices was reached in February — and it should be followed in a month’s time by news that prices are higher than their level a year earlier.

The Nationwide’s numbers showed a 0.9% rise in September, to an average house price of £161,816. On a seasonally adjusted basis, prices are up by 7.2% on February and by 4.1% on December last year, so are on course for a 2009 rise. They are still 13.5% below their peak, which was reached in October 2007, before the mortgage taps were abruptly turned off.

What does this tell us about the outlook? All the usual health warnings apply about limited housing supply and the impact of rising unemployment. I have noted before, however, that markets were thin when prices were going down. It would be unusual, moreover, to have another big bout of falls when the economy is recovering.

Despite the small dip in August, approvals remain well above earlier lows; up by 63% on a year earlier and by 91% on their low point last November. Although the number of approvals edged lower, their value rose, from £7.1 billion to £7.2 billion in August. Meanwhile, the same Bank of England survey that showed mortgage availability had tightened over the past three months suggested that more loans would be available over the next three.

House prices will not carry on rising at their recent rate, but last week’s news was significant. Consumer confidence, according to the latest survey by GfK NOP, is at its highest since January 2008. As long as people feel better about themselves and the economy, they will feel better about buying houses.”

So encouraging news for those with properties!

What this also shows is it will be harder to get as strong level of discounts – I mean the pool of sellers who will give away a quarter of the value of their property which is what we aim for, is not surprisingly getting smaller! I would imagine in another 6 months it will be hard to get 15-20% discounts, never mind 25%.

The latest Nationwide House Price Index revealed house prices rose 1.2% in May, meaning the annual rate of decline has improved to -11.3%.

The findings mean the average UK house price now stands at £154,016 – for me this is a far more affordable level and fits far better with average salaries throughout the UK.

While I don’t suddenly expect prices to jump quickly, I do think the number of distressed sellers that will accept huge discounts will continue to reduce in numbers – already this has happened with the huge drop in interest rates.

Martin Gahbauer, Nationwide’s chief economist, said: “The three-month on three-month rate of change – a smooth indicator of short-term price trends – rose from -3% in April to -0.5% in May and now stands at its highest level since January 2008. “Although the short-term trend in house prices has clearly improved from where it was at the beginning of the year, it is still too early to say that the market is turning definitively. The improvement in house price trends is consistent with signs of stabilisation in several other economic indicators and suggests that any further price declines may occur at a less rapid pace than in 2008.

“The movement of house prices ultimately depends on the balance of demand and supply of houses on the market.”

Rightmove also reported a 2.3% jump in asking prices in May, the biggest jump since 2003. The buyers’ market is certainly over in several ways.

So what we are starting to see is clear – supply of properties is at a low – with people still reluctant to sell unless they need to and new build property at an all time low, so numbers of property coming to the market is very low.

With more buyers keen to get onto the market due to first time buyers having saved their deposits, or people having to move to a larger property, this means demand is growing and with demand outweighing supply in some areas, this is leading to asking prices and actual sale prices increasing in some areas.

With borrowing rates very low – this is a great time for buyers to come onto the market – and I know 3 friends who are currently buying for themselves and perhaps not finding as many bargains as they would like out there….!

So in summary – while prices will not suddenly shoot up, the supply of good value, heavily discounted properties is reducing, and as finance improves further vendors will get more bullish about their asking prices and be less likely to accept a silly offer – not so good for hard nosed property investors!