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"Strength" in UK market

7th November 2005 | back to article listings BACK    print this article PRINT

It has been claimed that the UK housing market is showing good signs of growth, despite the recent fall in price inflation.

According to a report from the Halifax, the housing market remains relatively robust and should see some signs of growth in the near future, suggesting that the market has now bottomed out. The assessment of a healthy property market in the UK will be good news for property investors and may encourage a leap in activity in the market as investors look to add to their portfolios before prices begin to rise once again.

Although there was in fact little change to the average price of a property in the UK during October, the large increases that were seen during September and August helped to nudge overall price inflation for 2005 to 3.9 per cent. That is the highest level of inflation I the UK propertry economy for six months and represents a returning confidence in the market from a number of sources, including first time buyers.

While the Halifax report insists that people in the housing market should not get over-confident, as the results do not represent a return to the sharp increases in prices of previous years, the growth is encouraging because it suggests that there is hope of a healthy future in the market.

Halifax chief economist Martin Ellis outlined the position by stating: "The overall pattern of price movements over the past few months shows that the market has strengthened compared with earlier in the year, but the static level of prices in October suggests that we are not poised for another sustained period of sharply rising property values."

Explaining the reasons behind the strengthening market, Mr Ellis added: "Continuing economic growth, the high level of employment and a boost to household sentiment regarding the future direction of interest rates following August's base rate cut are all supporting housing demand."

However, the figures from Halifax appear to contradict the results from Nationwide, which found that property prices had in fact risen during October by 1.3 per cent, rather than remained flat as Halifax claims. While the difference may be accounted for by the slightly different periods covered by the two institutions, it is clear that the property market is showing signs of a recovery. This will be welcomed across the industry as a bonus during a year when most had expected prices to remain stagnant.

The fact hat there is now some upward movement in prices may not mean a return to the heady days of previous years, but it could provide a platform for a more stable market, with un upturn in the number of first time buyers entering the bottom end of the market, as well as the opportunity to be able to purchase properties at the higher end of the market for a more reasonable price.

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