Greater London is the biggest contributor to rising house prices
Property sales in England and Wales have risen by their highest monthly level so far this year and prices are on track to record a 2.5% to 3% increase for the year, new figures show.
Sales were up by 2.5% in August, their highest level so far this year and prices are up 2.6% compared to a year ago, according to the latest LSL/Acadametrics index.
With little change in prices over the period from September to December 2011 and current stability in the monthly rates in 2012, the likely outcome for annual house price growth at the end of the year is in the range of an increase of 2.5% to 3%, according to Peter Williams, housing market specialist and chairman of Acadametrics.
‘This rate, if it proves correct, would be slightly ahead of the Bank of England target of 2% for the general rate of price inflation in the UK economy, notwithstanding the fact that actual inflation has been significantly higher than targeted,’ he explained.
The index includes cash sales and is therefore at odds with both the Nationwide and Halifax indices, both of which are recording price falls currently.
‘Given that Greater London is the biggest contributor to rising house prices, and that a significant percentage of these transactions are for cash, particularly at the top end of the market, this is a very important factor driving the LSL Acadametrics index. The upward pressure on London’s house prices which is being identified by our index, but not by the lender indices, has a knock on effect on the reported price movements for England and Wales as a whole,’ said Williams.
There is stability in the market rather than huge changes in price and that is likely to continue, according to Williams. The LSL Acadametrics E&W House Price Index shows a marginal rise of £153 or 0.1% in the average price for properties sold in England and Wales during August, as compared with July. For the fourth month in succession prices have remained within the £226,000 to £226,250 range, with the August price being just £6 different from that seen in May.
‘The average national price statistic is thus currently looking extremely stable in nominal terms, although monthly stability in house prices is not universal across the country, with areas such as Yorkshire and Humberside witnessing a 1% decline in prices during the month of July,’ he explained.
But it is not an even picture with considerable regional variations and the north/south divide continuing to grow and even within cities there are variations. For example, in London Kensington and Chelsea is seeing five time the annual price growth of less affluent boroughs such as Lewisham.
‘The housing market demonstrated its resilience in August, as both house prices and sales activity rose, highlighting the underlying demand from buyers. In place of the usual seasonal slowdown, transactions bounced back by 2.5% in August,’ said Richard Sexton, director of e.surv chartered surveyors.
‘However, rather than signaling a radical shift in the housing market, the improvement reflects a mini resurgence following more sluggish buyer activity earlier in the summer, affected by a combination of the Jubilee bank holiday and historically heavy rainfall. In reality, obtaining a big enough mortgage remains a hurdle for thousands of first time buyers, despite the government’s NewBuy scheme. While a lack of stock continues to support house prices, it is cash buyers and the equity rich that are providing the impetus for short term improvements in the market,’ he explained.