TheMoveChannel.com | International Property

Browse By Subject

Money

Property

Social

Professional

'Aggressive' house prices soaring

25/04/2007

UK house price inflation has stabilised at around 10% per annum, having been at close to this level for five months in a row since November 2006...

Rightmove, whose index records the asking prices of property around the country rather than the price finally paid, still shows much stronger growth than the other indices which are recording actual transactions.

This reflects homeowners' expectation of house price growth and is leading to aggressive pricing of property. Certainly there is the opportunity for discounts to be taken from these prices by the eventual buyers, but in a market constrained by supply the scope for price reduction must be limited.

The five major UK house price indices show an average of 10.2% annualised growth for the twelve months prior to March 2007. This is just a 0.1% decrease in the rate of growth from the previous month (10.3%) and a 5.5% increase since March 2006 (4.7%). See Graph 1.

Average UK house price rises

The average house price, taken from the average price provided by all five major indices is £204,176, up from £201,650 in February. This shows an increase of £2,526 in the value of the average property in the last month and an increase of £18,124 in the twelve months from March 2006, when the average price of a home was £186,052 (see Graph 2).

Stuart Law, Managing Director of Assetz comments:

“The average home in the UK is continuing to climb in value month on month, with the rate of growth far exceeding many comparable Western European markets. It is very likely that limited supply, combined with vendors' aggressive pricing, will feed through for many more months to come in the form of robust price growth. Our expectation remains that 2007 will see price growth in the region of 8 - 10% for the year.

“Buy to let investors are compensating for the gradual raising of interest costs by initiating rent rises and seeking out alternative high yielding property, such as smaller commercial property, UK holiday lets and student accommodation. Short-term interest costs are not the primary concern for the majority of investors as most are investing with a ten to 20 year time frame view and the strong consensus is that property will rise substantially over that period, regardless of any shorter term fluctuations”.