UK house prices up on average 0.4% this month – up 4.9% this year (Issue 9)

December's House Price Watch Index summarises all the House Price Indices, so you don't have to


HPW Index graph2_Dec 2013Growing demand continues to push house prices up, particularly in the South. Improved economic outlook, Help to Buy publicity and record low mortgage rates are driving demand.

• A brighter economic outlook and publicity of the Help to Buy scheme are seen to have boosted optimism and encouraged buyers back into the market, although actual take up of Help to Buy is currently below expectations – possibly because of stringent approval criteria and higher mortgage rates (estimated 30% higher than renting a comparable property). Rightmove agent feedback: “Some agents report very few approvals – one of the active Help to Buy lenders has so far approved 169 mortgages out of 1075 applications. Feedback from agents seems to be you have to be squeaky-clean and approval better with 6% deposit”

• The real driver of demand seems to be record-low mortgage rates – Bank of England data indicates mortgage rates have declined (eg: interest rate on two year fixed rate mortgages for those with 10% deposit fallen from 5.6% to 4.4% over past 12 months). Nationwide: “Typical mortgage payments for a new borrower accounted for 27% of disposable earnings in Q3 2013, its lowest since Q2 1999 and below the average of 36% over the past 30 years.”

• Hometrack indicates “the recent announcement of the Bank of England to curtail Funding for Lending for mortgages is likely to result in mortgage rates drifting higher and reduction in the buying power of households reliant on mortgages to fund a home purchase”

Comparison of monthly indices

Regional Summary – House prices dip in North, rebound in Wales and continue to rise elsewhere

After gains last month, house prices down in North where demand/ supply gap is minimal. Prices are down in North East, North West, Yorkshire & Humberside. House prices in Wales up significantly 1.45% this month and all other regions experience continued uplift in prices.

The North/ South divide continues. London’s average house price exceeds £460,000; up 9% since October last year according to Land Registry figures. Areas outside the South and East have an average house price below £200,000; lowest in the North East (£121,000) “Faster sales rates are eroding the stock of homes for sale adding to the scarcity of housing…the average time on the market nationally is 8.4 weeks. London has the lowest time on the market at 3.6 weeks….and the proportion of sales achieving the asking price in London at 97.7%; a record high.” Hometrack

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