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House price recovery continues

1st November 2005 | back to article listings BACK    print this article PRINT

The UK's housing market may have been languishing for the majority of the past year, but new figures have suggested a sustained recovery could be on the cards.

According to the latest research carried out by Nationwide, the UK's house price inflation has been sparked into life, as the economy begins to rouse itself from the slump of the past few months. Following on from the summer cheer for property investors, when prices showed the first signs of turning the corner, Nationwide's October figures have seen that trend continue.

Despite falls in August and September, those dips had been less than for some months, but Nationwide's news is even more positive than many analysts might have anticipated. The firm has revealed that prices have rebounded to such an extent that they more than make up for the losses of the previous two months, climbing by 1.3 per cent during October.

That will provide an early Christmas present for property investors, who have been waiting anxiously to find out when the market would finally bottom out and had become concerned by the slump following something of a resurgence at the start of summer. With property prices again on the rise, it seems likely that the market has now bottomed out.

But investors are unlikely to be rushing to sell their properties, with inflation levels still far lower than they were in the early part of 2004, as Nationwide's figures demonstrate that the longer trend shows prices have risen by just 0.2 per cent in the three months to October. Instead, it remains a relatively stable time to look for more investments, as many analysts have suggested that prices will stagnate over the course of 2005, before regrouping to rise once again in the years to come. While the property boom may well be over, many experts believe there is still plenty of investment opportunities to ensure a stable economy for years to come.

And one area in which this is more likely to be noticed is with the impact of self-invested pension plans (Sipps), which come into force next April and are widely predicted to have a major effect on the property market, both in the UK and abroad. That impact is tipped to spur on property price inflation, as investing in property will become much easier for thousands of people.

Sipps could be the shot in the arm that the market needs and if it does prove to foster some rapid rises in house price inflation, many more experienced investors may find the spring of 2006 is a good time to become more active in the property market.

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