House Prices on the rise
The most recent figures from the housing market show that prices have actually undergone an unexpected jump of 1.6 per cent for the month of September. The average house price in the UK is currently sitting at £163,500. In real life terms, this means that the average value of a UK home has shot up by about £9,000 since April. But, it’s not time to get carried away yet. Values are still a long way off the high average of £199,612 set in August of 2007.
The trend is encouraging though. This is actually the third monthly rise in succession and the fifth we’ve seen so far this year. The industry has attributed this sudden improvement in the market to the winning combination of increased demand for, and reduced supply of, properties available for sale. This may not seem like a great result for people looking to buy a house but it bears sound tribute to the cyclical patterns we see in the housing market and in global finance generally. Buyers have been enjoying the benefits of the greater affordability in the housing market since mid 2007, due to the substantial reduction in both property prices and interest rates in this period. As a result, even greater demand has followed and the market stimulation has essentially been self-perpetuating.
Of course, before we get carried away with these green shoots of recovery, this rise in demand is likely to be capped by the rising unemployment and low earnings growth that is continuing to grip large sections of the British public. Also, the improvement in the housing market could well encourage a greater number of people to put their houses up for sale. This would alleviate the pressure of reduced supply and put the brakes on any runaway housing boom before it really gets started.
Research has also emerged that seems to suggest that those borrowers who can offer significant down payments and control more of the equity in their home are being offered substantially lower rates, almost half the level of those looking to borrow a larger percentage of the total value of their new home. This would point to banks picking the most attractive borrowers in an effort to avoid any debt risks that they feel have more chance of defaulting on their mortgage.