Property Investment News

The latest property price news from Halifax has shown that UK house prices have risen for the fifth consecutive month.

The survey, conducted by one of the largest lenders in the UK, said that prices were up 1.4% in November, bringing the average price of a UK house to £167,664. This figure is still 1.6% lower than this time last year, but it is 4.2% up on the beginning of 2009.

The figures came with a Halifax prediction that house prices would most likely stay flat throughout 2010 if more properties came on the market.

A Halifax economist stated that the recovery in prices since the spring has been driven by the increase in property demand, caused by the improvement in affordability of existing homeowners. It was stated that the increase in demand plus the shortage of available properties have pushed up property prices. The property investment market has also shown increased demand but a shortage of investment property at present.

According to the Halifax index, UK property prices were at the lowest levels in April of this year, but have increased 8.5% since. The housing market had seen a 23% decline since the peak in August 2007.

The Bank of England’s Monetary Policy Committee has maintained interest rates at the record low of 0.5% after the meeting today.

Economists have widely expected this, saying that the committee was unlikely to make any significant changes until having more time to study the pre-budget report yesterday.

Although the maintained base rate is not good news for savers, who are making almost nothing on their savings, it is better news for those in property investment as the buy to let mortgage rates may remain low for some time.

The economy had been expected to come out of the recession during the final quarter of 2009, after suffering the longest recession on record.

However, data released this week shows that the manufacturing sector still struggled in October, and the trade deficit grew to the biggest margin since January, showing that neither of these would help boost the economy growth during the final quarter.

Disappointing high street reports in November also quashed hopes that consumer spending would boost an economic turnaround.

New data released this morning also confirmed that Italy had returned to economic growth during the third quarter, which leaves the UK the only G20 nation that is still stuck in the recession.

Property investors and tenants should be prepared for rent rises as the property market appears to be making a recovery.

Average rents rose 0.1% to £831 per month between October and November, making it the 7^th month in a row for increases.

The November rental index showed the lettings cost is still 2.5% down from last year but the gap is getting smaller month by month. It is thought that rental prices may before long be back to the 2008 levels.

Tenants taking advantage of rental bargains or trading up during the last 18 months should be prepared in case prices increase.

While too much property supply has led to rents decreasing over the past year, research has shown the amount of properties available to rent has also gone down by 3.5% this month and 10% last month.

A possible explanation previously offered by experts is that the fall in property prices between the end of 2007 and April this year forced many potential sellers, hesitant to take a low offer, to instead opt to become ‘accidental landlords’ renting out their own properties.

Since March, however, prices have been rising, prompting some owners to try and take advantage of the gradual recovery. Rightmove stated that there was a window of opportunity again with London asking prices being back up to the peak level in 2007.

Findaproperty stated that a decline in available properties was causing the rental costs to increase.

Potential tenants appear to be moving faster to snap up an available property, the average number of days taken for a property to let now being 55 days down from 71 days in January.

Per region, however, trends in recovery are varying; London, the South East and the South West are showing a market recovery. Wales, the North and the West Midlands have seen a reduction in rental values.

The average rentals in London increased to £1,640pcm in November, an increase of 0.2%. In Wales, however, it fell to £626pcm, a decline of 0.8%.

Property investment yields were recorded at around 4.5% in most regions, with the exception of the South West where investors received yields of 4.05% as margins have been squeezed due to rising house prices and increased rental supply.

It appears that the family market is driving up rental prices, as house rental figures are increasing faster than flats.

It has also been revealed last month that landlords are gradually becoming more optimistic of a turnaround in property values.

However, the rental market continues to face the crucial headwind of rising unemployment. Although the increase in rate for jobless has been lower than previously predicted, it is still expected that there will be further increases from the current 7.8% rate, just short of 2.5 million. Some expect a total peak of 3 million in 2010.

The latest mortgage figures show that a 2 year fixed rate mortgage is at its lowest average since June this year. Calculations by Moneyfacts show that the average interest rate for fixed rate mortgages has fallen below 5%.

July saw an increase to an average rate of 5.21%, but lender competition is bringing the rates down further.

If, however, any homeowner wants to fix a mortgage for a longer period, then the rates have continued rising.

There were positive signs that the worst in the mortgage market was over. Homeowners, first time buyers and investment property buyers can now find mortgages where there were previously few around.