In May, the average price paid for a house in England in Wales rose by 0.5%, the latest LSL Property Services/Acadametrics House Price Index has found.
For five of the past six months, there have been small increases in house prices with one month showing no change. Over the last 12 months there have been only two months in which prices have fallen. Average house prices rising from £219,000 to £223,000 over past 12 months.
“On an annual basis average house prices have increased by 1.9%,” explained Dr Peter Williams, chairman of Acadametrics. “This is the first uptick in the annual rate since April 2011 and the largest rise since December 2010.
“But this sudden change in the annual rate requires explanation, lest it be misinterpreted. The May annual rate has, in fact, been considerably influenced by the events that took place in March and April of last year, when there was a rush by buyers at the top end of the market to complete their purchases prior to the introduction of an additional 1% stamp duty tax on properties costing £1 million or more. This came into being on 6th April 2011. It had the effect of raising average house prices in March and April 2011, only to be followed by a drop in average house prices in May and June 2011, when buyers at the top end of the market became conspicuous by their absence. Specifically, the May 2011 average price was brought down by the lack of activity in sales of £1 million plus properties. This is one cause of the rise in prices, this month, year on year.
“Although there is still less activity in the £1 million plus housing market than there was in March and April 2011, the top-end of the market has come back. This, together with an increase in activity in the buy to let sector of the market, are the main reasons why prices are 1.9% higher than a year ago.
“The lender house price indices are not reporting a similar annual pattern for two reasons. Firstly a large number of the high- value transactions are for cash, on which we report but on which the lenders do not. Secondly many lenders restricted loans in excess of £1 million and were less engaged with this market-sector; hence their data are less influenced by activity at the top end of the market.”
David Brown, commercial director of LSL Property Services, added: “It’s certainly not a consistent picture around the country, but the return of growth to the property market on an annual basis shows the market is beginning to stabilise. The rush to complete high-value transactions before 2011’s closing of the stamp duty window meant annual growth figures in the early part of this year weren’t necessarily reflecting the progress being made in the property market. A measured response to the growing and still uncertain eurozone crisis from mortgage lenders, along with ongoing strong demand from those able to save up large enough deposits to make purchases, has supported prices despite the tough external conditions which are buffeting the market.
“The regional picture is still varied, with Yorkshire & Humberside seeing prices fall -2.3% on the year while London’s prices grew 2.4%. This demonstrates the fundamental differences in the economic situations of different regions in England & Wales and that lenders are treading with caution in areas where high unemployment is a threat to borrowers’ finances.”
Brown added: “The return of transactions to around 60,000 per month shows that the peak and trough effect of the first-time buyer stamp duty holiday seems to be stabilising and that the return of the levy for properties valued below £250,000 hasn’t produced a sustained slump in demand. This is in part a result of the limited supply of housing stock at the lower end of the market, but also demonstrates buyers are anxious to escape the private rental sector as soon as they can put together the funds. But the frustration remains that had the holiday been extended even more buyers could have had access to the market to support property values.”
