House price growth

The increase left the typical UK home costing £205,846, according to Nationwide

What’s the latest?

House price growth sped up in February with property values climbing by 0.6%.

The increase, which followed a 0.2% rise in January, left the typical UK home costing £205,846.

The annual rate at which house prices are increasing also picked up slightly during the month to stand at 4.5%, compared with 4.3% in the year to the end of January, according to Nationwide Building Society.

Why is this happening?

Nationwide said the housing market continued to be supported by the UK economy, which remained relatively strong.

Economic growth accelerated slightly between October and December, while the unemployment rate remained stable at an 11-year low of 4.8%.

But the group warned the outlook was uncertain, and the economy was likely to slow down during 2017, with consumer spending hit by the weaker pound.

Robert Gardner, Nationwide’s chief economist, said: “Nevertheless, in our view a small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support prices.”

image: https://st.zoocdn.com/zoopla_static_cms_content_cms_document_assets_(426074).jpeg

Home for sale in Ascot.Above: four-bedroom home on Kings Road in Sunninghill near Ascot 

Who does it affect?

The fact that the heat appears to have come out of the property market is good news for those looking to buy a home as it takes off some of the pressure to purchase somewhere quickly.

But the ongoing shortage of homes for sale continues to be an issue as it limits choice for potential buyers.

The fact that house price growth is expected to slow further may also have an impact on stock levels, as homeowners are more likely to put their homes on the market to ‘test the water’ during periods of strong increases in property values.

Sounds interesting. What’s the background?

Nationwide said there had been a significant increase in the proportion of people buying property with cash during the past decade.

It said cash transactions had soared from just 20% of all purchases in 2005/2006 to around 35% now.

But Nationwide said the rise was driven by a decline in mortgage lending, rather than a jump in actual cash transactions.

Even so, the share of cash buyers has not fallen back as the economy has recovered and lending has picked up again.

The level of people buying with cash peaked at 38.9% in the first quarter of 2016 as investors rushed to complete purchases before new higher stamp duty rates came into force in April.

Top 3 takeaways

  • House price growth sped up in February with property values climbing by 0.6%.
  • The increase, which followed a rise of 0.2% in January, left the typical home costing £205,846.
  • The annual rate at which prices are increasing also picked up slightly during the month to stand at 4.5%, compared with 4.3% in the year to the end of January.
Base rate to 0.25 per cent

Base rate to 0.25 per cent

The Bank of England has, as expected, cut its base rate to 0.25 per cent after a record seven years at its previous historic low of 0.5 per cent.

Today’s cut may be an important psychological boost to markets and manufacturers but it is uncertain what its impact will be on house sales.

Firstly, it is not clear whether high street mortgage lenders will follow suit and cut their interest rates for borrowers – most are under no compulsion to do so. Secondly, the number of buyers with tracker mortgages that to some extent mirror the movement of the BoE base rate is far smaller than before, as increasing volumes of people have arranged fixed-rate deals ahead of what many expected to be an interest rate rise, rather than a cut.

“Today’s rate reduction will have little impact on the mortgage market. Banks already have very tight margins and may want to focus on savers who are struggling to earn a decent return, rather than cutting rates further for borrowers” cautions Adrian Anderson, director of mortgage broker Anderson Harris.

Even so, agents have welcomed today’s decision.

Stamp duty change leads to dramatic 11 per cent surge in house sales

247 Property Agent Ltd.There has been an 11 per cent increase in sales in Scotland over the past year – and one major agency puts that down squarely to the replacement of stamp duty with the more progressive Land and Buildings Transaction Tax. Christine Campbell, Your Move managing director in Scotland, says: “By cutting the cost of purchasing cheaper homes, LBTT has led to an 11 per cent increase in sales over the last year.  These figures confirm that lower purchase taxes for property can significantly boost activity in the housing market, while also making it more affordable for first-time buyers to get a foot on the ladder.” With 104,344 home sales in the last 12 months, the market has outdone the previous year’s 93,601 sales.

Campbell says the Scottish Government should now consider lifting the LBTT bands higher to support Scotland’s fragile property and construction sector however, despite the boost in sales volumes, house prices are still down 7.8 per cent year-on-year according to Your Move data.

“In part, this drop in property values was caused by a spike in high value home sales last year, before the LBTT was introduced, but today’s market hasn’t regained those losses yet” suggests Campbell.

“Most recently, despite the new LBTT surcharge adding an extra three per cent to the cost of second homes and buy to let properties, house prices have remained stable from last month. However, home sales for the first four months of the year are still well ahead on the same point in 2015, with 4,751 additional property purchases so far in 2016.

logosZPG_AdBlock_120x75