House prices are on the rise again as the property market gradually shakes off the recent slowdown caused by uncertainty around the General Election.
While this is good news for buyers and sellers who are happy to see the market moving forward again, experts are warning that the root cause for the ongoing housing crisis is far from eradicated.
The growing gap between supply of fresh housing stock and demand for new homes is worrying, many of them say.
House prices up more than 5 per cent in June
House prices increased by an annual 5.4 per cent last month pushing the average property value in England and Wales to £181,619, according to the latest Land Registry house price index.
This was highest value recorded since November 2007, when properties went for £180,983 on average.
Compared to the previous month, house prices in June were 1.1 per cent higher.
London again emerged as the most expensive place to buy with prices surging 9.2 per cent year-on-year, while Yorkshire & The Humber saw the lowest annual price increase of 1.4 per cent.
Experts stress the importance of more supply
“We can see vitality pumping through the veins of the property market again, and the heartbeat of house price growth was getting stronger in June. Relieved buyers and sellers have stirred again after the election stupor, breeding healthier annual and monthly price rises across the country, ” Adrian Gill, director of Your Move and Reeds Rains estate agents, comments.
“Confidence at the bottom of the market is in particularly strong spirits, and it is the region with the lowest average house price – the North East – that has seen the biggest monthly improvement in prices, as cheaper mortgage finance and government support schemes inject more energy into areas where the recovery needs a careful watch.
“While these symptoms all look promising, prices will only head north if the supply of new homes coming onto the market dries up. Growth in the construction industry was flat during the second quarter of this year, which should be ringing alarm-bells. Buyers’ purchasing power has rarely been stronger, but this golden opportunity will be spoiled if there’s nothing for them to buy,” Gill adds.
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Ben Thompson, managing director of estateagent4me, suggests that one way to boost supply is give more options to older homeowners:
“The fundamentals of any market are supply and demand and the Land Registry index shows that in the housing market, demand is outweighing supply.
“To balance this we need more homes to be built. As part of its recent budget, the Government set out plans to relax the planning laws to make it easier for councils to build on brownfield sites. Whilst this is a welcome move more will need to be done if we are to reach the number of houses needed to keep up with demand.
“One segment of the market that was overlooked in the budget is that of older homeowners. Often these homeowners remain in their family homes long after their children have grown up. Maintaining a large property can be expensive and having to cope with a large garden and a property on many levels can be a daunting prospect in later years. Building smaller properties aimed at the older homeowner could have a big impact on the rest of the market. Boosting the supply of larger homes would help families move into more appropriately sized accommodation which would in turn help first time buyers.”
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Duncan Kreeger, director of West One Loans, sees the weak construction figures a proof that there will be no magic solution for the homebuilding crisis.
“House prices have now returned to pre-crash levels, with the capital once more driving the market with the most significant rises. But while this is music to the ears of homeowners who will see the value of their asset rise, it is further frustration for first-time buyers who see their dreams of property ownership pushed further out of reach.
“This news is compounded by the fact that the ONS GDP growth figures show a flatlining construction industry – which doesn’t suggest the miracle of new homes the UK needs. This lack of supply places further price pressure on existing stock and means that prospective homeowners are facing an uphill struggle. We heard plenty of promises before the General Election about how many new homes would be built each year and now is the time for the Government to make good on their pledge. Developers and those reintroducing properties to the UK’s housing stock need lending support to help deliver this. And while short-term providers have taken up some of the slack, high street lenders need to follow suit.”
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