Property shortage boosts house prices

Jul 1 2009 by Iain Laing, The Journal

HOUSE prices rose for the third time in four months during June as the market was boosted by a shortage of properties being put up for sale.

The average value of a UK home rose by 0.9% during the month to stand at £156,442, according to Nationwide.

The annual rate at which house prices are declining also fell for the fourth month in a row, dropping to 9.3% – the first time for a year that the measure has been in single digits.

But despite property prices now being only 0.2% lower than they were at the beginning of the year, the group warned that the recent improvement was unlikely to mark the beginning of a sustained recovery.

It said that while the rises seen since March were likely to be more than just “statistical noise”, they were taking place against a backdrop of very low activity.

The number of mortgages being approved for house purchase is still 55% below its long-term average despite recent rises, and at a level which is usually associated with falling prices.

Figures released by the Bank of England showed the number of mortgages approved for house purchase had levelled out at around 43,000 during May.

Economists said the figure, which was below their expectations, highlighted the current fragile state of the housing market.

They warned that house prices still had further to fall due to rising unemployment and the ongoing problems in the mortgage market.