UK house prices recorded a “modest” rise of 0.4% in May, according to the latest survey from the Nationwide Building Society. This further supports the view that the housing market is gradually gaining momentum, with the annual rate of price growth rising to 1.1%, the fastest pace since November 2011. The increases mean that the average house now costs £167,912.
There could be several reasons for the improvement. Firstly, credit is cheaper and easier to obtain, partly a result of the Governments’ Funding for Lending scheme. This allows banks to borrow money at a discount from the Bank of England, providing they can show they have passed it on to customers in the form of loans. This has increased the availability of mortgages and pushed down rates.
As a result, prices in the last three months compared with the previous period were up by 0.4%, and have been growing according to this measure since October 2012.
Property sales are also up, running at about 5% higher each month this year than the average monthly level in 2012. The number of approved mortgages has also picked up since the start of the year.
Simultaneously, the UK economy also returned to growth in the first quarter of 2013, which may have created a more positive sentiment and encouraged potential buyers to make a move.
This momentum may well continue, as the Government is committed to providing even more credit, particularly through the Help to Buy Scheme; from last April, borrowers are able to take out an equity loan from the Government, enabling them to put down a deposit of just 5% on a property. Under the second scheme, starting in January next year, the Government will guarantee up to 15% of a mortgage on homes worth up to £600,000, which will be used to support £130bn of mortgages.
However, there are significant regional differences, with much of the momentum coming from London and South East England (hopefully excellent news for our area here in Kent). Yet for properties that are priced correctly, there seems to be no shortage of buyers.
Whilst these measures are likely to encourage residential investment, there could be continued upward pressure on house prices if more homes are not built. Estimates are that the current levels of construction are less than half that required to house the UK’s growing population.
Regional house price differences
- London: up 6.2%
- South West of England: up 0.3%
- East of England: 0.7%
- North West of England: down 3.7%
- South East of England: up 1.4%
- Yorkshire and Humber: down 1.2%
- West Midlands: up 0.5%
- Wales: down 2%
- East Midlands: down 1.2%
- North East of England: down 5.7%
Source: Land Registry. Annual change to end of April.