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Housing transactions see summer pick-up

Annual house price increases slowed to 8.1% owing to the stronger year on year comparisons.

LSL Commercial Director David Brown said:

“House sales showed particularly strong growth in July, ahead of the usual seasonal uptick. The influx of quality properties on to the market in recent months has alleviated upwards pressure on prices, while buyers took advantage of a slight easing in lending conditions to secure their new home.

We don’t expect a return to the mini-boom of late last year, but the likelihood of a significant downturn is small too. Small monthly house price fluctuations are likely to continue in the short-term, and there will be considerable regional differences, particularly as the coming budget cuts hit some parts of the country worse than others.

Longer term recovery is dependent on an improvement in the mortgage products on offer for first-timers. With thousands of frustrated buyers waiting in the wings, unlocking first-time buyer demand is key to re-energising the whole market.”

Academetrics Chariman Dr Peter Williams said:

“The average price of a home in England & Wales is now £220,685. At this level, it is down £11,143, or 4.8%, from its peak in February 2008 of £231,828. In terms of annual price changes, the housing market has been more or less static over the last three months. The still-considerable annual rate of growth at 8.1% reflects the significant rises that took place between August to October 2009 and December 2009 to February 2010, rather than activity in more recent months. As these early months drop out from the annual calculations, we will see the annual rate of growth continue to fall over the remainder of the year.

“As will be evident from the charts accompanying this release, three of the indices published to date report modest price falls in July whilst two – Halifax and LSL/Acadametrics – report modest rises. This very mixed picture, both in terms of divergent reports for the same month and small positive and negative fluctuations over a series of months, is consistent with a reduced and slowing market with no single strong driver and where unique events such as the abolition of HIPS, or even changes to Stamp Duty, can have an undue impact.

“More sellers have returned to the market, which has strengthened the position of those buyers with cash or agreed loan finance – the supply of which has eased a little. Clearly, continuing low interest rates are helping, though lenders must test a mortgage applicant’s capacity to cope with higher rates given that current conditions are somewhat unusual. The Bank of England continues to signal little appetite to push rates up this year, reflecting the MPC’s view of the continued vulnerability of the UK economy. Regardless of that, home buyers have to factor in higher interest rates and taxes and reduced income, and this finds expression in reduced confidence and continued caution regarding house purchase.

“Given the current market quiescence, we reflect upon house price trends over the last five years i.e. from 2006 to 2010. This shows that the average price of a home is now 8.2% higher than it was 5 years ago. Purchasers in Greater London have seen a 20% price rise; by contrast, buyers in the West Midlands and Wales have seen prices remaining effectively flat. For comparison, the retail price index rose by 12.9% in the period and the FTSE fell by 15.7%.

“Summing up, we are clearly in a period of considerable uncertainty and, at best, the market is likely to continue to remain close to flat; that said, there will be strong regional and local variations. Despite the underlying imbalance of demand and supply, there is little to suggest that we will see any strong recovery in the housing market in 2010 or, indeed, into 2011.

“Historically, the number of homes sold per month has tended to peak in July and, so far, in 2010 this trend holds true. We estimate that the market increased in July 2010 by 11.1% from June, compared with an average 4.1% growth in the month over the last 15 years. Sales in July 2010 represent 69% of the long term average for the month; a proportion which, with the exception of May 2010, has been increasing throughout the year, from its low of 53% in January 2010.”

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