House Prices Rise 3pc in First Half of 2010
Between May and June this year the average UK property price rose by 0.1 per cent, although there was a drop from 9.8 per cent to 8.7 per cent in the annual rate of inflation for house prices. The typical house price was £170,111 according to the latest figures from the Nationwide.
According to Martin Gahbauer, Nationwide’s chief economist: "Barring a significant pick-up in house prices over the next few months, the annual rate of inflation should continue to drift lower, in light of the very strong price increases recorded during the summer of 2009. Over the first half of 2010, UK house prices have risen by a cumulative 3 per cent."
He went on to say that household finances would suffer from additional pressure due to the Budget, but interest rates are likely to fall due to fiscal consolidation. This means that overall the affordability of mortgages should actually improve, counterbalancing the effects of the Budget.
Mr Gahbauer continued: "The spending cuts and tax increases in the Budget will clearly put a squeeze on household disposable incomes, which are undoubtedly an important driver of house prices."
"Given the already elevated level of the house price to earnings ratio, this limits the scope for property values to maintain the very strong upward momentum that we have seen over the last year. However, the acceleration of the fiscal consolidation means that interest rates are likely to be lower than they otherwise would have been, which should provide some offsetting support to households and mortgage affordability."
Mr Gahbauer thought that an improvement in public finances could raise confidence in interest rate stability, and more buyers could be attracted into the housing market as a result.
House prices news posted by Don on 01 July 2010
