What's in store for house prices?

Published:
20 April 2012
Topic:
News,Money,Mortgages

The price of property is a subject close to the nation's heart. After all, if you are a homeowner or want to be one at any point in the future, the state of the property market will directly affect you. So what's happening now and what is the outlook? We step back and take a measured look.

House prices up?

According to the latest house price index from Rightmove.co.uk, asking prices climbed by 2.9% in April on the previous month and are 3.4% higher than a year ago. The average price according to the website now stands at £243,737, breaking the previous record set almost four years ago in May 2008.

On the face of it this would suggest that the housing market is not only robust - but growing too. However, as with any figures expressed as an average, they can conceal the whole story.

The wider context

For example, it's only finite pockets of the country that are pushing up average asking prices, according to Rightmove - and unsurprisingly, London is the main driver. Average prices in the capital increased by 2.1% in April on the previous month, and are 7.9% higher than last year.

The south west is the next best regional performer, with asking prices a staggering 5.8% higher in April than the month before - although the annual increase is lower at 3.9%.

By contrast, other areas of the UK are skewing the average downwards.  While asking prices in Wales and Yorkshire/Humberside have risen marginally in April by 1.7% and 1.5% on March, sellers in both regions have reduced asking prices on a year ago by 1.5% and 0.2% respectively. 

Miles Shipside, director of Rightmove said: "From a national perspective, it has taken four years for sellers to pitch their asking prices above their previous record. However this is not a universal signal of a housing market recovery. The richest seams of housing market activity are concentrated around those with access to cash and finance, with a strong bias to the south and London in particular."

Different house price indices

As well as marked differences between the UK's regions, there are disparities between various house price indices too. Rightmove, for example, uses asking prices in its data, which could be very different to the prices home-sellers actually bank.

By contrast, Land Registry data is based on sales that have already completed - although because of this, it is usually about three months old. The Land Registry shows much more modest increases in average prices. Prices in February (for England and Wales) were 0.1% up on the previous month, and are currently resting at £161,588.

House price indices from Nationwide and Halifax are calculated differently again - both use their customers' own mortgage approvals.

On this basis, the latest data from Halifax shows that the average property price increased by 2.2% in March on the previous month but is still 0.6% down on this time last year. Nationwide reported that house prices had fallen by 1% in March and are 0.9% down on a year ago.

Other house price indices are different again. The Office for National Statistics (ONS) for example, uses data supplied by the Council of Mortgage Lenders (CML) which reflects mortgage approvals from all its bank and building society members. Its latest data showed that house prices increased by 0.2% in February and by 0.3% in the last 12 months.

Doing your own research

With such disparities to contend with when trying to work out the value of individual properties, things can get a little confusing. Thankfully though, we have the internet.

Property websites such as Zoopla.co.uk allow you to single out a particular property anywhere in the UK by inputting the address and postcode. It will then tell you what price the home last sold for and on what date - as well as provide an estimated current value based on a cross section of house price indices.

MoneySupermarket's partner website PropertyPriceAdvice.co.uk also provides a free instant valuation service with average, upper and lower estimates. You will need to enter the address of the property as well as more finite details such as whether it has a garage, central heating and the state of repair it's in.

Whether you are thinking of buying a home or even just want to carry out a rough assessment of the value of your current one for remortgaging purposes, either of these websites are a good place to start.

What do the experts say?

But what about the future value of house prices? Of course, no one has a crystal ball and this largely comes down to opinion. But we asked a range of housing experts who are best-placed to comment. Here's what they said.

Martin Ellis, housing economist, Halifax: "We expect little overall movement in prices this year, providing the UK economy does not suffer a pronounced weakening. The most likely outcome is that house prices will remain broadly flat in 2012 and 2013. There is, however, considerable uncertainty regarding the prospects for the UK economy which will, to a large extent, depend on how events in the Eurozone unfold.  As a result, the outlook for house prices is also uncertain."

 

Ray Boulger, senior technical manager at mortgage broker, John Charcol:  "I am forecasting that house prices will increase by a further 2% by the end of 2012. In the longer-term house price movements are very difficult to forecast as it they will depend primarily on what happens in the Eurozone.  Greece being bailed out is only a case of the 'can being kicked down the road' - but the can's getting bigger.

"The Eurozone can't survive in its current form and if and when it dismembers this will have a massive impact on mortgage availability and the cost of housing. That's why, beyond the end of this year, the housing market is very difficult to forecast."

Mark Harris, chief executive of mortgage broker SPF Private Clients: "There is no single national housing market so general commentary is impossible - London and the south east are operating as totally different markets to the rest of the UK. Overall, the mainstream housing market moved sideways last year - but while the south and prime central London performed strongly, prices slid in Blackpool, Merseyside and Newport.

"We expect prices to rise modestly next year - by 1% London and 0.5% across the UK as a whole. In terms of nominal five-year growth, we forecast 6% for the UK and 19% for London."

Robert Gardner, chief economist at Nationwide: "The current dampening effect on housing market activity and prices may fade over the course of the summer, especially if the wider economic outlook begins to improve and other policy measures, such as the Government's NewBuy scheme, are successful in supporting buyer demand.

"However, in our view the challenging economic backdrop is likely to continue to act as a drag, with house prices moving sideways or modestly falling over the next 12 months."

 

Andrew Montlake, director at broker, The Coreco Group: "House prices will rise by 3% by the end of 2012. But there is no doubt that London and the South East will yet again lead the way - less affected by public sector job cuts and still attracting foreign buyers from Europe and both the middle and far East.

"While new government initiatives to assist the house building industry are a step in the right direction, they are still only a drop in the ocean. The shortage of supply against steady (though unspectacular) demand, together with a continuing low interest rate environment, will be enough to keep prices at a similar level to 2011 at the worst."

If you are a first-time buyer, check out our jargon-busting video which will arm you with the basic information you need.

And remember that, whether you are buying your first home or moving from an existing one, shopping around for the best mortgage deal can save you a fortune.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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About This Author

Laura Howard

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Content Editor, Money and Lifestyle

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