According to The Chesterton Humberts’ House Price Poll of Polls the poor data in December followed the first rise in mortgage lending in over six months, however the size of November’s increase was tiny by comparison to the fall over the following month.
In response to growing pressure from the government, several of the United Kingdom’s largest banks issued a statement of intent to increase new lending to businesses in 2011 compared to 2010 levels. The same pressure must now be applied to mortgage lenders, with a focus on reducing fees and spreads for first time buyers and those without large deposits.
The Poll believes that mortgage lending will turnaround in 2011 and will average around 50,000 transactions per month by the end of this year. This is still less than half of the level of the pre-credit crunch era. A pickup of lending remains the key to the house price recovery.
Most of the major house price indices continued to show monthly falls for the most recent month of data. Of the six with data for January, two showed a month-on-month increase, two showed declines of only -0.1% and two showed steeper declines similar to results reported on the same indices last month.
Taking into account the timeliness, lag and accuracy of the various indices, the Poll shows that the average price of a residential property in England and Wales declined by -0.3% over the month to January.
This brought the annual increase of all homes in the UK to just 0.2%, making property prices around the same price at the start of 2011 as they were at the start of 2010. The typical price of a house in England and Wales stood at £177,112 in January 2011 compared to £176,779 during the same month a year earlier and £177,695 in December 2010.
Taking into account only those properties which were sold in January, the table on the right hand side shows that selling prices were lower in January 2011 compared with January 2010. Optimism about the strength of the recovery has declined amongst sellers during this time.
Robert Bartlett, Chesterton Humberts’ CEO, comments:
“The first Chesterton Humberts/CEBR House Price Poll of Polls for 2011 further highlights the regional differences we are experiencing relating to house price movement. However, overall we do not expect any significant decline in values across the country in 2011 and in certain markets within London and the South we anticipate some growth.
The continuing stock shortage in London has already resulted in strong prices being achieved in January and we expect to see more record prices being achieved as a result of the dramatic supply/demand imbalance. This is a very good environment in which to sell good London property.
“The market outside of London remains challenging, particularly in the Midlands, where more highly leveraged buyers are struggling to find the finance. The level of demand is not sufficient here to lead to any optimism on prices rising. In the South and South West the continuing stock shortage has resulted in extremely unrealistic asking prices and this creates the danger of a stalled market. Buyers are in no mood to pay over the odds and vendors must take this in to account when going into the market.
“Rising inflation is usually good news for the property sector as investors prefer to hold real estate assets in this economic climate. However, the melancholic economic news is weighing heavily on both buyers and sellers, and is as much of a disincentive to action as lack of mortgage finance. The real risk to the UK housing market will be rising interest rates. Any substantial increase in mortgage rates will put huge additional pressure on home owners and have a potentially damaging affect on the reinvigoration of the UK economy.”
Douglas McWilliams, Chief Executive of CEBR, comments:
“House prices are likely to grow tentatively over the coming years, given that household incomes are being squeezed, banks are still wary of lending and uncertainty has increased due to the Government’s spending cuts. However, affordability for first-time buyers will continue to grow as mortgage interest rates remain at record lows and house price growth weakens.”
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