Housing Market Recovers… Or Does It?
Halifax today announced that house prices are on the rise again, up 1.1% in July, with the average house now costing £159,623.
They also say that prices are up in the three months to July by 0.8%, with this being a more useful statistic in terms of quantifying underlying trends. This is the first increase in this figure since October 2007.
So, everything’s OK again and we should all be building buy to let empires with our lovely unsolicited bank loans? Not so fast…
Northern Rock announced earlier this week that 1 in 25 of its mortgage customers are in arrears, so not all is well.
Unemployment is expected to get worse before it gets better, and the banks are getting their usual hard time in the media, this time for (amongst other things), not lending enough.
So, how are these figures improving?
One theory is that the housebuilders (Barratt, Taylor Wimpey, et al) spent the end of 2008 and the first half of 2009 clearing their stock of new build properties, often at silly discounts.
This had the effect of creating a false market for houses and artificially pushing down the average cost. With little activity in the secondary residential market as people fretted about their jobs and ability to secure a mortgage, these fire sales of new build houses had a disproportionate effect on the figures.
With the supply of houses at very low levels, you can expect the figures to continue to get better, but a sustained increase in the number of completions will be the key to the market fully recovering.
Until people are confident about their jobs and the banks decide to loosen their lending criteria, tedious dinner party boasts about making a killing in the housing market look a way off yet.