First-time buyers keen to beat end of stamp duty holiday and easier access to mortgages are helping to boost the market
Estate agents and property analysts say the latest Land Registry house price figures could be a sign that the housing market is on the turn.
House prices increased by an average of 1.1% in January in England and Wales, a bounce that can partly be attributed to a rush by first-time buyers to secure a home before the exemption to stamp duty on cheaper properties ends on the 24 March. But experts also say that easier access to mortgages is beginning to help aspiring homebuyers after four years of market frustration.
Peter Rollings, chief executive of estate agent Marsh & Parsons said: “There’s no doubt that demand from first-time buyers hurrying to beat the end of the stamp duty holiday buoyed national house prices in the short-term, but an improving mortgage market has been lending a helping hand.
“A growing number of high loan-to-value (LTV) mortgage deals, combined with persistently low rates have played a part in increased buyer demand.”
Russell Quirk, director of estate agents emoov.co.uk, said that for the four last years, most of those moving were people who had to do so, while “discretionary” movers were put off by fears of a second property crash.
But he added: “While these Land Registry figures show that prices are still down on where they were a year ago, January’s price rises hint at a steady return of confidence. The coiled spring of anticipation is slowly beginning to unwind as more would-be buyers see buoyancy return to the market.”
However, Tracy Kellett, managing director of UK buying agent, BDI Home Finders, said the rise would end up being bad for the market and homeowners: “Long-term, house price rises such as this are not sustainable. They are being propped up by an extreme lack of stock and historically low interest rates. What’s happening is that only the best properties, the ones that attract real buyer competition, are selling right now. This is naturally skewing the figures. Sellers see price rises like this and mark up their own properties accordingly, which accentuates the paralysis in the market as a whole.
“The January house price rise is not good news for the market, it’s quite the opposite. The higher the market rises in the current climate, the harder it will fall.”
Property sale prices in London rose by an average of 2.5% in January, the highest increase of any area of England and Wales according to the Land Registry.
The capital also experienced the highest annual rise, 2.9%, taking the average price achieved to £351,305. The south-east was the only other area where properties increased in value over the year, with prices rising by 0.5%. Within London, properties in the affluent area of Kensington and Chelsea rose the most – by 9.3% in the year to the end of January. This compares with a 1% across England and Wales as a whole.
Rollings said London house prices were unlikely to “run out of steam any time soon”. “While a growing number of first-time buyers have been on the move in London, house price growth has been largely driven at the other end of the market, and this will continue in spite of the end of the stamp duty tax exemption.
“Demand for prime property in the capital is already flying, with investors from abroad seeking to insulate their money from the ongoing eurozone crisis in less volatile assets like London’s bricks and mortar,” he said. “When you consider the severe shortage of stock in central London, and the sheer competition for each home that hits the market, the sales process is weighted heavily in favour of home sellers.”
Nearly all areas of England and Wales saw an increase in property prices in the month of January, with homes in north-east England increasing by 2.2% and the south-west by 1.6%. Only those in the north-west continued to fall by 2.1% last month.
Monthly and annual percentage changes displayed for counties, unitary authorities, metropolitan district councils and London boroughs represent rolling four-monthly averages of the price changes over one month and 12 months respectively. The Land Registry says there are insufficient properties registered each month to make the calculations statistically valid otherwise.
* More on the great price divide in this weekend’s Observer Cash section
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