UK house prices: A return to optimism? – CNBC Comment
The UK housing market is a favourite topic of conversation – a national pastime, even. But an abundance of different data types mean that statistics can swamp and confuse anyone looking to gauge the current climate.
Property website Rightmove just announced its busiest ever month for house hunters, while Halifax saw its biggest January monthly price increase since 2009. Meanwhile, the Bank of England has reported a pick-up in mortgage lending. “Credit availability is improving again,” James Knightley, UK economist at ING, told CNBC. “I think demand could strengthen through the year.”
Chief UK economist at Berenberg Rob Wood agrees, putting it down to lower borrowing costs, better consumer confidence and cheaper fuel costs, which effectively mean that real incomes are rising again. “Reports of the death of UK housing have been overdone. I look for prices to gain 5 per cent this year for the UK as a whole,” he told CNBC.
Howard Archer, chief UK economist at IHS Global Insight, is another expert estimating a 5 per cent climb in house prices this year, telling CNBC that he suspects the weakness in activity is “bottoming out”.
This optimism comes after a plateau at the end of last year, which saw many house sellers having to accept cuts, following a sizeable housing boom. Anecdotal evidence suggested that homeowners were selling up for six percent lower than asking prices, as the market came to a grinding halt. General elections also traditionally put a cork in market activity, with uncertainty over future government policy.
But not all metrics have caught up with the current mood. The Royal Institution of Chartered Surveyors (RICS) reported that house prices rose last month at their slowest annual pace since May 2013. The organisation has noted a particular slowdown in London, which has been at the forefront the housing boom of the last two years. “I think we will see London underperform, given more properties will be subject to higher stamp duty rates,” said Knightley, noting the new changes to tax levies when purchasing homes.
London market conditions continue to deteriorate with prices, buyer enquiries and sales falling, said Simon Rubinsohn, the chief economist at RICS, in a press release last week. But like any housing data, it can be patchy. An estate agent operating in the south east of the capital told CNBC that January had been his “best month on record” and signalled better times ahead for buyers and sellers.