Nationwide – house prices rise again

Nationwide have published their monthly report stating that house prices have risen for the fourth consecutive month. In August, it is claimed that we have seen property prices increase by 1.6% making the average house price in the country £160,000. However, is this the recovery most are looking for?

A summary of the report shows:

  • House prices rose by 1.6% in August
  • Year-on-year decline slows from -6.2% to -2.7%
  • Low interest rates helping to underpin prices for the moment
Headlines August 2009 July 2009
Monthly index * Q1 ’93 = 100 317.9 313.0
Monthly change* 1.6% 1.4%
Annual change -2.7% -6.2%
Average price £160,224 £158,871

* seasonally adjusted

Commenting on the figures Martin Gahbauer, Nationwide’s Chief Economist, said: “The price of a typical house rose for the fourth consecutive month in August, increasing by 1.6% on a seasonally adjusted basis. The 3 month on 3 month rate of change – generally a smoother indicator of the near term trend – rose from 2.7% in July to 3.3% in August, the highest level since February 2007. At £160,224, the average price of a typical UK property is still slightly lower than 12 months ago.

However, the annual rate of change rose further in August, from -6.2% to -2.7%. Over the first eight months of 2009, the seasonally adjusted index of house prices has risen by 3.2%, though relative to the October 2007 peak it is down by 14.4%. The full report can be read here.

Nationwide’s research gives an indication of the market that those at grass roots are experiencing. It seems a commonly held wish by an ever increasing number of estate agents; ‘more housing stock’ please.

Very low interest rates are benefiting existing homeowners helping them afford their current mortgage during the recession where as this financial climate could quite easily of forced them to sell their property in years gone by.

First time buyers continue to struggle finding a new mortgage due to the required loan to value (LTV) the majority of mortgage lenders are asking for, though this does seem to gradually increasing slowly. Nationwide Mortgages currently have a tier system of interest rates based upon the LTV. More details on Nationwide Mortgages can be found here.

So whilst we may be seeing house prices increase this is more likely associated with the lack of supply versus demand in the property market coupled with very low interest rates than actually ‘recovery’. It does give some hope of stability to the property market; though many feel this may in time be seen as a false horizon with future falls to follow.

It is feared low interest rates are holding off inevitable future repossessions that are often seen in times of recession. As interest rise the pressure will increase for repayments to be made and put further strain on the housing market. Ironically, if this happens it will bring the wanted housing stock back to the property market but negatively effect house prices.

Nationwide’s Gahbauer said interest rates would rise from their historic low of 0.5% at some point and when they did, it could well return renewed weakness to property prices. “When this happens, it will probably have the effect of releasing additional supply back onto the market and dampening the recent rise in buyer interest. Under such conditions, the strong price increases of recent months would become difficult to sustain,” he said.

Nationwide Mortgages are gradually making their first time buyer mortgages more attractive and achievable with greater LTV mortgages and ‘special offers’ such as reduced reservation fees. This is good news as the market will continue to be slow without first time buyers.

The next few months coming up towards Christmas will certainly be interesting. Will we see the usual increase in sellers and housing stock coming to the market after the school holidays? and if so will this recent stability in prices be sustainable?

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