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Price inflation reaches ten-month high

31st March 2006 | back to article listings BACK    print this article PRINT

Signs that the property market may be establishing some long-term stability have been in further evidence this week.

The latest figures released by Nationwide have revealed that property price inflation has reached its highest point for ten months, demonstrating the fact that the property market is beginning to make something of a comeback following the lows of 2005. Property prices last year suffered somewhat as the sector saw a downturn in buyer interest.

But renewed vigour in the market since the turn of the year looks to be bringing some much-needed stability in the property sector.

According to Nationwide, the annual rate of property price inflation increased to 5.3 per cent this March, up from 3.7 per cent in February. That means that the average price of a house is now £8,000 higher than it was in March 2005, demonstrating that even a cool property market can bring benefits over a period of time.

While the growth in property price inflation may not be as staggeringly high as it was in the late 1990s and the early part of this decade, it has begun to show some signs of growth and a number of studies during March of this year have indicated that the market may have bottomed out just before Christmas and is now on the rise again. Therefore, investors who had been keen to see a return to the rocketing inflation levels seen in 2004, for example, may be disappointed when seeing today's levels of inflation, but the greater stability that the current conditions have brought to the sector means that many investors will be better off in the long-term under the slower rises.

That is because, if the investors make sure that they are in the property market for the long-term, it can bring strong returns over the coming years. Those who had hoped to make some fast money from the property sector may be a little disappointed, but they should also be aware that the lower levels of inflation mean that there is less chance of a dramatic crash in prices.

Many analysts had feared that there could be a gigantic price crash in 2005, as the market cooled, but this did not occur. However, that does not mean that a hefty price fall could not happen and investors in the sector for the long-term are more likely to make money by riding out any difficult periods. They are also likely to see long-term growth overcoming any minor blips which could see short-term declines, as the 2005 market did.

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