Are House Prices Set To Boom Again? - Bbc

[Badger]

http://news.bbc.co.uk/1/hi/business/4972220.stm

Will house prices boom again?

Analysis

Ian Pollock

BBC personal finance reporter

House prices are shooting up once more.

The traditional spring house hunting season is firmly under way and mortgage lenders and other experts who predicted that prices would be subdued this year - or even fall - could soon be left with a certain amount of egg on their faces.

After a big slowdown last year, the early months of this year suggest that 2006 may see a return to the double digit inflation rates that characterised the housing market in 2002, 2003 and 2004.

The Halifax

Let's take the latest Halifax survey at face value.

It says that during the first four months of this year, prices across the UK rose on average by 4.4%.

If that trend continues then properties will end the year around 13% more expensive than they started.

That could mean the average house price reaches nearly £195,000.

The market has been stronger at the beginning of the year than we had been expecting

Martin Ellis

Chief economist

The Halifax

Despite the recent acceleration in prices, the various lenders who produce the most widely followed surveys are still trying to play things down.

For instance, the Halifax says it expects inflation to slow in the second half of the year.

But the price increases recorded so far have already outstripped its forecast for the whole of 2006.

Last December, the Halifax predicted that prices this year would go up by just 3%.

Martin Ellis, the mortgage lender's chief economist, acknowledges that the activity has been surprisingly lively.

"The market has been stronger at the beginning of the year than we had been expecting," he says.

Mr Ellis admits that for his original forecast to be true, prices would now have to go into reverse and register an absolute fall in value over the remaining eight months of 2006.

And he concedes that is now most unlikely.

"We could get into double digit growth over the next few months, but I expect it to ease back later in the year," he says.

Wrong predictions?

The Halifax is not the only organisation that appears to have got its market predictions wrong.

Property prices have risen faster than observers had expected

The Nationwide, the Royal Institution of Chartered Surveyors, and the web-site Hometrack all forecast modest single-digit increases for this year.

An economics consultancy, Capital Economics, which has for several years been forecasting price falls, went further and again took the view that prices would drop in 2006, by 5%.

Could these subdued predictions turn out to be right after all?

Well, the various organisations that measure the market do not all do it the same way.

So it is possible that the Halifax survey is simply overestimating what is really going on.

Its figures are based on its own mortgage lending and they show that prices are rising much faster than, for instance, the monthly survey from its main rival the Nationwide.

The latest view of the country's largest building society, Nationwide, is that prices have risen by just 2.5% so far this year.

That is still slightly less than its 3% forecast for the whole of 2006.

Buoyant demand

What drives house prices up is demand from would-be buyers.

The latest figures from the Bank of England show no let up in the granting of new mortgages.

The number of new loans approved for house purchases in March was 27% higher than a year ago and slightly higher than the average for the last six months.

Could this come to a halt?

Well, unemployment has been going up, with the claimant count rising steadily for the last year.

But that on its own may have no effect in terms of dampening things down.

Back in the 1980s, when a recession led to mass unemployment, those people who were still in jobs - the vast majority in fact - were still able to stoke up a house price boom that only went bust at the end of that decade.

With the economy continuing to expand, so is the number of people in jobs, up by nearly 150,000 in the last year.

If prices do shoot up further, the Bank of England could become worried again and push up interest rates.

Such a move had a dramatic effect just two years ago when three small increases in borrowing costs produced a quick and very sudden slowdown in house prices.

Meanwhile the property market in London, the traditional driver of house price inflation, is hotting up again.

And where London leads, usually the rest of the country eventually follows.

[A Fool & His Borrowed Money]

"Houseprices to rise" say Mortgage lenders

"There has never been a better time to buy" say Estate Agents

"Now is a good time to buy double glazing" say double glazing salesmen

[iLegallyBlonde]

And yet out of my "saved" properties on Rightmove only 3 out of 34 have sold. In the £350k price range not much is moving at all.

[Brian Potter]

There is next to nowt moving in my neck of the woods

[FTBagain]

I'm afraid in my area Bath properies in the 200k area have been selling very fast , although most reappear on the 'to rent' list, where many have stayed .

I think that prices are genuinely rising at the moment but the market is seriously unbalanced if my local market is anything to go by. As for the number of mortgages, debt consolidation will contributing to those figure IMO.

If interest rates go up towards the end of the year, I think at a few of the John-come-lately BLT will go bust and dump their portfolios on to the market.

That would make for quite a Crash

[zag2me]

Definitly rising round here, 2 bedroom houses started off all at about 179k in january. In the last few months everything is selling within days and now there is nothing on the market for less than 187k, even the houses with very small 2nd rooms are above this ceiling. Its depressing seeing real gains in house prices in my area for the first time in a while.

Edited May 5, 2006 by zag2me

[Father Fred]

What get's me is that even the most stupid uber-bull would have to accept that in historical terms prices are high.

Prices being high makes them more likely to crash than if they were low.

[Please PM me if you're not following this TTRTR).

Therefore, "news" (inverted commas are necessary) saying that house prices could boom again can only be bad "news" for everyone.

A soft landing is clearly the best case scenario (unless your job will survive a recession, you want to buy but not at todays prices and you don't give a ****** about 75% of the people in this country who'd suffer financially and personally in a recession), and another boom is makes a soft landing much less likely.

FF

[BillyShears]

To balance all the stagnant or declining parts of the country there must be parts that are steaming ahead. Where are these parts of the country? It can't just be London keeping the rest of the country positive.

Billy Shears

[Golden Shower]

To balance all the stagnant or declining parts of the country there must be parts that are steaming ahead. Where are these parts of the country? It can't just be London keeping the rest of the country positive.

Billy Shears

Possibly. There has been a huge improvement in trunover where I live in North Yorkshire, but I'm not too sure if prices are rising much. But if London is driving it, how long will it be before a ripple effect is felt again?

[Jason]

It's a poor article in my opinion. Are they set to boom again? I doubt it. The reason is simple, least summer interest rates went down. Swap rates (fixed mortgages) went down even further. People could afford to borrow more, so house prices went up. Now rates (including swap rates) are on an upward path people can't afford to borrow as much, so prices will come down.

The question is can the BoE lower rates when the housing market is struggling (probably in a years time)? I think it would be far more difficult to cut rates!

[what]

The only person who is really making money is the person who build the boards which say

FOR LET.

They are thousands all around my area.

[right_freds_dead]

Let's take the latest Halifax survey at face value.

the bbc....making the most from your licence fee.....

[othello]

I suppose with the poor election results the BBC are in full spin on behalf of their client.

[Fancypants]

A soft landing is clearly the best case scenario (unless your job will survive a recession, you want to buy but not at todays prices and you don't give a ****** about 75% of the people in this country who'd suffer financially and personally in a recession), and another boom is makes a soft landing much less likely.

FF

quite right FF (although I am one of those who would like to buy but not at today's prices - therefore want an HPC)...

however, the market cannot simply plateau, it always has to be moving in one direction or another. I'm not even sure that an "equilibrium" exists anywhere in the housing market. There is always a balance of sentiment or fundamentals dragging it one way or another. The wiser VIs understand that a soft landing isn't possible and that the market needs to keep moving upwards to even survive.

[ruisort7]

Am I missing something?

"Well, unemployment has been going up, with the claimant count rising steadily for the last year.

... With the economy continuing to expand, so is the number of people in jobs, up by nearly 150,000 in the last year."

I guess if the population rises very quickly then both can go up.

[Given Up]

I'm not sure what is happening. We are buying & selling and both sides have gone horribly wrong. We have lost 2 places we were buying one gazumped the other the vendor pulled out. The place we are selling is now on it's third buyer and it sems to be going OK but it's so slow.

[Flat Bear]

What get's me is that even the most stupid uber-bull would have to accept that in historical terms prices are high.

Prices being high makes them more likely to crash than if they were low.

[Please PM me if you're not following this TTRTR).

Therefore, "news" (inverted commas are necessary) saying that house prices could boom again can only be bad "news" for everyone.

A soft landing is clearly the best case scenario (unless your job will survive a recession, you want to buy but not at todays prices and you don't give a ****** about 75% of the people in this country who'd suffer financially and personally in a recession), and another boom is makes a soft landing much less likely.

FF

Good post

But do you really believe it possible that debt/prices can get higher?

[music man]

http://news.bbc.co.uk/1/hi/business/4972220.stm

It says that during the first four months of this year, prices across the UK rose on average by 4.4%.

If that trend continues then properties will end the year around 13% more expensive than they started.

That could mean the average house price reaches nearly £195,000.

Wow - that means some areas are to drop 68% in Norfolk for the year.

Good 'ol Halifax statistics.