England and Wales house prices hit three-year high

After lingering in the doldrums for the first few months of 2011, it seems the rest of England and Wales is finally catching up to London, with average asking prices for properties reaching their highest level since June 2008, according to real estate website Rightmove. 

According to the property portal, the average price of English and Welsh properties currently being advertised on their website is £238,874 – the highest level in almost three years, and only just below the peak price of £242,500, reports Reuters. However, website director Miles Shipside stated that prices were to some extent being artificially boosted by continuing low interest rates and the high inflation rate in the economy – adjusted for inflation, home values are still 10% below their 2008 peak.

"Base rates of 0.5 percent and continuing lack of mortgage availability are enabling the housing market to stay in its 'low transaction limbo', with few forced sellers driving prices down and few genuinely proceedable buyers", said Shipside. "With such low transaction volumes, prices do not necessarily reflect market fundamentals." 

With buy-to-let becoming the increasingly dominant asset class in UK real estate, two key market segments continue to do well – prime London property, which Rightmove reports hit a record average price of £431,013 last month, and student accomodation. Both of these investment markets promise high rental yields because of the continuing influx of new tenants bolstering demand – the Universities and Colleges Admissions Service (UCAS) reports demand for university attendance in the UK is at an all-time high, with nearly 700,000 university applications for the current academic year. 

Estate agent Knight Frank's Student Report 2011 indicated that with the demand-supply gap in UK student accomodation, rental yields are currently rising at 5% nationally. Director of investment property specialists Property Frontiers, Ray Withers, commented that significantly higher-than-average yields can often be found in more regional areas outside of London. ""The returns that purpose built student accommodation can yield do vary geographically", says Withers. "In Liverpool, home to three of the country's leading universities and some 53,000 students, rents in the last academic year, 2008/9 – 2009/10, increased by 13%, vastly exceeding the average. Furthermore, with Liverpool's universities expecting to attract high numbers of applicants for the next academic year, 2011/12, many from overseas, this regional city presents strong demand for student accommodation and in turn an attractive opportunity for buy-to-let investors."

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