Average UK house price up 0.5% in October
Despite the pessimists suggesting that the UK housing market is approaching “price bubble” time it seems that confidence in the UK market has never been higher. A report today has confirmed that the average UK house price increased by 0.5% during October which equates to around £200 per day. Interestingly, despite some of the doom and gloom from property analysts, a survey has also confirmed that more than 70% of people in the UK believe that house prices will continue to rise over the next 12 months.
While the variation in house price increases during October was between zero, in the north-east of England, and 0.8% in London, perhaps one of the more telling figures is the number of sellers obtaining their full asking price.
Buyers scramble for property
Due in part to the governments Help to Buy scheme it seems that 95.2% of sellers in October received their full asking price, up from 94.7% in September. When you bear in mind that this is just 0.5% below the all-time high in the boom year of 2007 this reflects the growing confidence in the UK property market. It also perfectly illustrates the fact that demand is outstripping supply in many areas in the UK.
Quote from PropertyForum.com : “As the price of UK property continues to move higher and higher there are now serious concerns that first-time buyers may become a thing of the past.”
Historically, if you look back on investment trends, the time when “everybody” is looking for further increases in property prices, or other investment assets, is the time when we are heading towards danger. We may well be entering a phase of the house price market where some investors, whether domestic or overseas, are investing in property at any price just to get the exposure. This is perhaps the most dangerous of investor and the ones who could potentially end up with significant losses!
Is the government manipulating prices for votes?
There has been speculation that the UK coalition government is attempting to inject short-term enthusiasm into not only the UK property market but also the UK economy. Many experts believe this is the only way that the Conservative party in particular stands any chance of regaining power at the next election. Some may see this as a biased political viewpoint but we are starting to see a flurry of investment articles suggesting short-term buoyancy which could lead to medium-term problems.
Whether or not the UK government would ever undertake such a dangerous and highly controversial strategy remains to be seen. The truth is that while the UK government’s Help to Buy scheme has assisted in increasing demand while supply remains relatively low, domestic and overseas investors were already showing interest in UK property before the scheme was announced. Indeed many people believe that the scheme could lead to some froth in the property market but is not the underlying reason why UK property prices are so strong.
Conclusion
When we start talking about a 0.5% increase in the value of your property in one month alone this will start to catch the eye of sellers. As the market continues to move further and further ahead it is highly likely we will see some buyers step away from the market and more sellers show their hand. In a perfect world this would lead to a balanced and a more controlled property market correction but at this moment in time buyers are certainly willing to pay up for exposure to the UK property market – but for how long?