Builders herald improved property market as house prices go up

Saturday, 06 July 2013 08:05

By Ben Salisbury

The annual rate of house price growth in the UK is at its highest level for almost three years, according to the latest Halifax House Price Index (HPI).

Yesterday, one of the UK's biggest building firms, Taylor Wimpey, said that after almost six years of decline, the housing market is experiencing the first major boost since the financial crisis.

Taylor Wimpey said the housing market had "shown measurable improvement for the first time since the downturn of 2007-08".

Taylor Wimpey chief executive Pete Redfern said: "This is the first time we have seen relatively normal sales rates. We're getting close to the normal average levels where we've been in the long term over the past 25 years. We've seen much more interest from first-time buyers as well as at the top end of the market."

Two rival firms also announced improved sales forecasts as the sector makes the most of the support the property market is receiving from the government through the Funding for Lending Scheme and the Help to Buy initiative.

Building firm Redrow said in an unscheduled update that profits are expected to be materially better than forecast and Galliford Try also said it was on course for record results.

Halifax reports that house prices in the quarter ending in June are up by 3.7 per cent on the same period last year. This is the biggest rise in this annual measure since August 2010 when annual house prices went up by 4.6 per cent and adds to the growing evidence that the property market is improving.

The survey compares with last week’s HPI from Nationwide that said house prices were going up by 1.9 per cent on an annual basis.

House prices went up by 0.6 per cent on a monthly basis in June from May, the fifth consecutive monthly rise.

Analysts had expected the monthly rise to be 0.4 per cent and the annual increase to be 3.6 per cent.

The improved economy and government initiatives aimed at helping the property market such as the Funding for Lending Scheme (FLS) and the Help to Buy initiative have helped boost confidence in the housing market and allow more first-time buyers to get on the property ladder by being able to access competitive mortgage deals.

The FLS allows lenders to access funds at cheaper rates on condition that they pass on the borrowing to individuals and businesses.

The Help to Buy scheme allows first-time buyers to get a property with just a five per cent deposit with the government lending new buyers up to 20 per cent of the value of a new home up to £600,000, intetest-free for five years. The scheme is being extended in January to provide a state guarantee on mortgages, though there are concerns that this will artificially inflate property prices.

This has helped house prices rise by 2.1 per cent in the last three months and take the average price of a property in the UK to £167,984, up by more than £8,000 on the level of £159,313 seen just eight months ago.

Commenting, Martin Ellis, housing economist, said: "House prices continue to rise steadily. Prices in the three months to June were 2.1% higher than in the previous quarter, edging above the 1-2% range recorded throughout the first five months of the year.

“The annual rate is at its highest for nearly three years with prices in the three months to June 3.7% higher than in the same three months last year.”

Halifax said that activity was also going up with the number of mortgage approvals for house purchases up by seven per cent in June compared to May, up to 58,200, the highest level since December 2009.

Mortgage approvals went up by two per cent in the three months to May, compared to the previous quarter and home sales were the highest for a single month since March 2012 when there was a rush to beat the deadline on being exempt from stamp duty on properties valued less than £250,000.

Martin Ellis added: “Improved confidence in both the housing market and the economy, combined with a shortage of properties available for sale, appear to be pushing up house prices. The Funding for Lending Scheme is also likely to be boosting the market by helping to reduce mortgage rates. There are also early indications that the Help to Buy: equity loan scheme may be stimulating demand.”

However, recent reports suggest that the improvements are being driven by London and the south-east and that not all parts of the UK are seeing house prices go up.

Howard Archer, Head UK Economist at IHS Global said: “It is evident that the overall increase in house prices is being driven by London and the South East, although the rise in house prices is becoming more widespread.”

Looking ahead, Mr Archer expects house prices to rise more strongly next year. “For the time being, we are sticking to our view that house prices will see solid but limited increases over the rest of 2013 and then strengthen more markedly in 2014,” he said.


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