Assetz® News - UK property investment remains strong despite slowing prices

UK property investment remains strong despite slowing prices

4th March 2005 |

Property prices are demonstrating something of a slump in the UK, and slowdowns are being evidenced in a number of markets worldwide following several years of impressive growth. Nonetheless, property investors in the UK are showing continued confidence in bricks and mortar.

According to the Association of Investment Trust Companies 40 per cent of the general public are sticking property for investment opportunities, believing the housing market will outperform equities.

They still feel property is the best way to make returns - and this was the same percentage six months ago. As a result, 69 per cent said they would not be taking out an ISA this tax year, compared to 57 per cent of active investors who said they would. The communications director at the AITC, Annabel Brodie-Smith said she was "surprised", especially after the continued media coverage, which suggests an "instability of the housing market".

"Despite the recent stock market resurgence, the man on the street still seems turned off equities meaning the investment industry needs to work together to help restore confidence in equity investment and education has a very important role in this," she said.

New figures from Halifax reveal that house prices fell 0.5 per cent in February meaning that the cost of the average home is now just 0.8 per cent higher than it was in June last year, at £162,816. Property values now are 12.1 per cent higher than they were 12 months ago - the smallest annual increase since December 2001.

At the height of the property boom in September 2003, with low interest rates and before house prices reached their later heights, mortgage payments stood at a 20-year low of 13 per cent of gross income. In contrast, in 1990 the proportion of income going on mortgages was at a high of 34 per cent.

Halifax's data is the third survey into the UK property market out this week, and there have been inconsistencies in outlook, with rival mortgage lender Nationwide said on Tuesday that property prices rose by 0.5 per cent, the exact amount that Halifax said they fell by.

Halifax saw the new figures as evidence of a gradual continued slowdown in the housing market. Britain's housing market has also been cooling off since last summer. According to the Nationwide index growth, prices have dropped from 20 per cent in July to just ten per cent this February. Elsewhere, Australia has witnessed the biggest deceleration - increase in house prices fell 19 per cent to only 2.7 per cent in the fourth quarter of last year. The fact that first-time buyers have been priced out of the market and buy-to-let demand has fallen is being blamed for the cooling off in these two countries.

However, in the US the opposite appears to be true. Its housing bubble continues to inflate, with prices up by 11.2 per cent over the year. Similarly, Europe has seen rapidly growing house prices. In France, for example, house price inflation has accelerated to 16 per cent, while Spain's is sitting at 17 per cent. Germany is the only country in continental Europe to have recorded price falls.