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House price rise is highest in two years

27th February 2007 | back to article listings BACK    print this article PRINT

Last month saw house prices in the UK experience their highest rates of growth since May 2004, a property website has reported. According to Hometrack, house prices nationwide rose an average of 0.7 per cent in February, bringing the rate of annual inflation up to around 6.4 per cent.

The monthly survey of British property trends also found there had been a 14 per cent increase in the number of properties that have been registered with agents. At the same time, there was a 23 per cent increase logged in the number of people looking to purchase a property, suggesting that demand may be in line to outstrip supply.

This is confirmed by Hometrack director of research Richard Donnell, who says that, in spite of the January rate rise, it seems that a lack of supply is continuing to support higher prices, primarily in London and the south-east. The number of property transactions taking place in February were lower than average and this was taken as a sign that it is currently a seller's market.

As Mr Donnell explains: "We are seeing property transactions, and pricing being set by those who can afford to move – that is to say existing owner occupiers, buy-to-let investors and the growing number of 'assisted' first time buyers."

Statistics released recently by the Council of Mortgage Lenders (CML), which represents over 90 per cent of the mortgage lenders in the UK, seem to bear out this conclusion. January's figures show that a record amount of mortgage lending was conducted in that month, with a total of £26.8 million being taken out.

"Mortgage lending kicked-off 2007 in robust shape and we expect this strength to continue over the next few months," said CML director general Michael Coogan, adding: "Quite how strong it will be later in the year depends on what happens to interest rates". The base rate has risen three times since last August, with a corresponding increase in the cost of mortgage borrowing.

According to Mr Coogan, "the markets are still expecting at least one more quarter point rise by the middle of the year". He said he would be "surprised" if some home buyers did not review the timing of their move. This view is not held by everyone, however. Richard Donnell is not convinced that buyers will be deterred in the coming months, even if there is another rise in the interest rate.

He says: "In the absence of any external shock to demand and the apparent willingness by purchasers to pay what is necessary to access the market, then house prices look set to increase further over the coming months."

Whatever the future holds, house prices show little sign of any dramatic fall, which is good news for property investors.

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/3314.html. Alternatively, please see our full press release archive.

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