Shortage of homes on UK market helps push prices up 1.7% in June

http://www.theguardian.com/business/2015/jul/09/shortage-homes-uk-market-prices-up-june

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The number of homes on the market fell to a 37-year low in June, helping send prices surging by 1.7% in a month and prompting warnings they will be pushed to ever more unaffordable levels.

As surveyors said the number of homes listed for sale with each of its members was at its lowest level since records began in 1978, Britain’s biggest mortgage lender, Halifax, said that the average UK house price had broken through the £200,000 barrier for the first time on its measure, following an unexpected 1.7% surge in June.

The Royal Institution of Chartered Surveyors (Rics) said that at 49.5, the average number of homes for sale with each member had fallen from 61 in June last year and was down from a peak of 148 in 1996.

It said the reasons behind the drought of homes on the market varied around the country – in expensive areas it blamed the high cost of stamp duty and other fees making renovation and extensions more financially appealing than moving. It added that lack of stock was self-perpetuating as people were put off selling because there was little choice of homes to move to.

Demand for homes increased in every area except the south-east, and Rics said its members were more positive about a rise in the number of sales than at any point since April 2014.

The mismatch between demand and supply appeared to be keeping prices buoyant and Rics said the number of members reporting price rises had hit an 11-month high. In total, 41% more surveyors said they expected house prices to rise over the next three months - the highest proportion in more than a year.

Rics chief economist, Simon Rubinsohn, said: “There had been some hope that the removal of political uncertainty following the general election would encourage more properties onto the market but the initial indications are that this is not proving to be the case.

“Additionally, the recent flat pattern of appraisals by respondents to the survey suggests this is not about to change anytime soon. As a result, it is hardly surprising that prices across much of the country are continuing to be squeezed higher with property set to become ever more unaffordable.”

Halifax’s monthly snapshot of the market, which is based on mortgages it has approved during the month, showed prices had risen for a fourth month running, and were now higher than the previous pre-crisis peak.

Over the quarter they were up by 3.3% – the biggest three-month increase since November 2009. The bank said the average UK property price had now reached £200,280 – the first time it had gone past £200,000 since it started recording prices in 1983.

Martin Ellis, housing economist at the Halifax, said short supply of homes for sale had been driving up prices.

“This shortage has been a key factor maintaining house price growth at a robust pace so far in 2015,” he said. “Economic growth, higher employment, increasing real earnings growth and very low mortgage rates are all supporting housing demand, with signs of a recent modest pick-up in demand.”

The sudden sharp June increase has resulted in a marked increase in the annual rate of inflation to 9.6% compared with 8.6% just a month earlier. It puts annual house growth back up to where it was in September 2014 and has caused some economists to rethink their forecasts.

“Our current forecast is for house prices to rise by 6% over 2015, but the Halifax data at least suggests that this may be too conservative a projection,” said Howard Archer, chief economist at IHS Global Insight, who described the lender’s latest report as “a bit of a stunner”.

However, Archer cautioned that data from the Halifax has been more volatile than other house price measures in recent months and that no one should pin too much weight on one particular house price survey or measure.

Matthew Pointon, property economist at Capital Economics, said the stage was set for further house price gains over the course of the year.

However, he added: “We doubt prices will be able to continue to rise at this breakneck pace.” Pointon said mortgage lending was unlikely to relax significantly and the Bank of England’s recent warning over buy-to-let “should prevent a surge in active housing demand, and keep house price gains to around 6% this year”.