| News
Unthinkable, but true, house prices rise yet again The Times July 09
Three months ago analysts would have called it unthinkable and homeowners would have been dismissed as wishful thinkers. Nevertheless, figures out today will show that not only have house prices risen for the third month in a row, but at the end of 2009 they could be higher than they were at the start of the year.
Nationwide has reported a 1.3 per cent rise in average prices, from £156,442 to £158,871 in July, boosted by a scramble for family homes in desirable postcodes.
The quarterly rate of change recorded by Nationwide rose from 1 per cent in June to 2.6 per cent in July — the highest level since February 2007. For the first seven months of 2009, prices have risen by a cumulative 1.3 per cent, according to the lender, bringing the fall recorded over the past 12 months to 6.2 per cent.
Martin Gahbauer, chief economist at Nationwide, said: “There is now a reasonable chance that prices could end the year slightly higher than where they started. Only a few months ago, such an outcome would have appeared unthinkable.”
However, economists have adopted an “approach with caution” attitude to evidence of rising prices. They pointed out that the rise is based upon a low level of transactions and said they were unconvinced that the positive roll will continue into the autumn, a traditionally quieter homebuying time.
Nationwide’s sample size is an estimated 3,600 properties — a figure based on the 45,584 mortgage approvals recorded by the Bank of England in June and the lender’s market share of 7.9 per cent.
Howard Archer, chief economist at Global Insight, said: “This house price data is off a very low level of transactions by past norms. It makes you wonder about how firm the underlying rise is. The economic fundamentals are still pretty lousy. One of the main factors behind the rise is the shortage of property, but if sellers believe prices are rising, they could be encouraged to put their homes on the market, which could paradoxically upset the balance and bring prices down.”
Analysts have attributed the monthly house price rises to a shortage of new homes because low-interest mortgages are allowing more homeowners to stay in their properties.
Lucian Cook, of Savills, the estate agency, said: “Low interest rates have enabled people to stay in their homes where they might otherwise have been forced to sell up in a higher interest rate environment.”
Savills has revised down its house price forecast for 2010, from a predicted rise of 1 per cent to a fall of 3.1 per cent because of fears that recently recorded rises are unsustainable.
Peter Rollings, managing director of Marsh & Parsons, another agent, said: “As the shortage of supply begins to ease in the autumn, house prices will return to a more modest rate of growth for the remainder of the year.”
According to the Land Registry, there is evidence that greater demand but lower supply of large family homes, especially in London and the South East, is pushing up prices disproportionately. Prices of prime property in London rose by 1.5 per cent for the fourth month in a row in July, according to Knight Frank. Offers over the asking price and sales going to sealed bids are now common for desirable homes in the capital, agents said.
However, demand for homes in other regions is less robust. Prices in Newcastle upon Tyne and Rotherham fell the most in June, down by 4.2 per cent, reflecting the lower demand and higher supply in those areas.
Case Study: Sealed bids can help sellers to get moving
On Monday at 9am, Kate Williams sold her three-bedroom flat in Battersea, South London, by sealed bid. At noon, she placed a sealed bid on a four-bedroom terraced house.
The self-employed lawyer and single mother says she has been through “emotional turmoil” this week but, because she wanted to “bring things to a head and get moving”, she asked Cluttons, her agent, to start a sealed-bid process.
“There were two or three apparently serious buyers but they were dragging their heels a bit and I just needed to know so I could proceed with an offer for the house I wanted to buy,” she said.
This meant that, at 9am on Monday, those who wanted to make an offer on her home were forced to place their top bid in secret simultaneously.
The sealed-bid process attempts to give potential buyers an equal chance and gain the best price for the seller. Estate agents have reported a rise of this over the past few months as the supply of desirable homes has dried up.
Miss Williams accepted the lowest offer because “the buyer seemed a better bet: more professional and more able to come up with the cash”. This is not an unusual rationale in the current market, where mortgage finance is hard to come by and rejection from lenders results in one in ten sales falling through.
But sealed bidding also makes buyers nervous, as Miss Williams found out three hours later, when she placed her bid. It was initially rejected, despite being £15,000 higher than the others, as the seller considered them a safer bet.
She e-mailed the vendors, laying out her financial circumstances in the hope that they would change their minds, which they did.
There are still risks to sealed bidding. Miss Williams, 40, could lose her buyer. But she says this route has enabled her to take advantage of what she thinks is a good time to trade up the ladder |
