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Market News

October 2009

House prices back to September 2008 levels

According to the latest Nationwide house price index house prices rose by 0.9% in September, the fifth month in succession that they have increased. The average price of a typical UK property is now £161,816 which is almost exactly the same as it was in September 2008. This is the first time since March 2008 that the year-on-year rate of change has not been negative.

This all sounds like good news however the number of house sales is still well below normal levels and there is usually a fairly strong correlation between transaction levels and house price inflation.

During periods when only a small proportion of the housing stock is available for sale, the relatively low turnover rate can trigger an increase in prices. This could explain much of the rebound in house prices since February.

In simple terms, when there is a shortage of quality properties coming onto the market, buyers are prepared to pay a premium to secure the deal and see off the competition – hence the house prices appear to rise. Once we see more properties for sale, the need to pay a premium will disappear and this could result in an apparent fall in prices.

Thankfully this would be a short term phenomenon and the long term forecasts are all positive…

• August 2009
  • Mortgage Volumes for July
• June 2009
  • It’s not all doom and gloom
• December 2008
  • The Bank of England has cut interest rates by one percentage point, from 3% to 2%, the lowest level since 1951
• November 2008
  • The Bank of England has cut the base rate by 1.5% bringing it down to just 3%