House prices show 3.9% increase


%VIRTUAL-SkimlinksPromo%House prices have recorded their strongest monthly uplift since 2002, with a 3.9% jump taking average values to £184,464, Halifax has reported.

On an annual basis, UK prices rose by 8.7% in May, accelerating on an 8.5% rise seen the previous month.
The month-on-month jump is the highest since a 4.2% increase was recorded in October 2002.

Stephen Noakes, mortgages director at Halifax, said: "Demand is still strong and continues to be supported by a strengthening economic recovery.

"Consumer confidence is being boosted by a rapidly improving labour market and low interest rates, although growth in average earnings still remains weak.

"However, there are signs of a revival in housebuilding which should bring supply and demand into better balance and curb upwards pressure on prices over the medium and longer term."

Halifax cautioned that monthly movements in house prices can be "volatile". On a month-on-month basis, house prices had fallen in both March and April, before the strong increase seen in May.

It said that figures showing the quarterly change in property values can be a more reliable indicator of underlying trends in the market.

The quarterly measure showed that house prices in the three months to May were 2.0% higher than in the three months to February.

Halifax's report continues a trend of strong house price figures. On Tuesday, building society Nationwide reported that house prices had reached a new all-time high in cash terms on its measure, standing at £186,512 on average after leaping by 11.1% in 12 months.

Speculation has been mounting that the Bank of England could recommend some measures to calm the housing market, which could possibly include diluting the Government's Help to Buy mortgage
support scheme.

There have already been signs that banks are deciding to put stronger curbs on high-value mortgage lending, which have been targeted at taking some of the steam out of the London market in particular.

Both Royal Bank of Scotland (RBS) and Lloyds Banking Group have announced that people applying to take out a mortgage worth more than £500,000 will see the amount they are allowed to borrow limited to four times their income.

Brokers have viewed these moves as sending out a signal that property values will not be able to push up strongly indefinitely, which could make buyers act more cautiously when faced with higher prices.

Toughened industry-wide mortgage lending rules came into force at the end of April which mean people applying for a home loan face more detailed questions about their personal spending.
Mortgage lenders also have to apply "stress" tests to make sure customers could still afford their repayments when interest rates rise.

Halifax highlighted HM Revenue and Customs (HMRC) figures showing there were 103,690 home sales in April, which is one third higher than in April 2013.

Howard Archer, chief UK and European economist at IHS Global Insight, described the 3.9% monthly uplift in prices as "a real bolt from the blue and at face value (and) unsettling for policymakers".

He said: "It will certainly ramp up pressure on the Bank of England to come up with more measures to rein in the housing market...

"The Halifax house price data have been highly erratic recently, but there is no getting away that the underlying trend still looks strong."

The people who affect house prices
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House prices show 3.9% increase

They have the power to push a price higher, depending on how many other people are in the running for a home and how liberal they want to be with the truth to the buyers. In some cases, they can also do more harm than good by initially overvaluing a property. The worst case scenario is the home eventually sells for less than it would have done had it been priced realistically in the first place.

Sometimes a quick-moving solicitor can be the difference between getting the home at the price you want and getting into a bidding war or missing out entirely. If the buyer needs a quick sale, they're more likely to do a deal with someone who has a flexible solicitor who can push through the sale so it suits them.

Research by Halifax concluded that anti-social neighbours could take £31,000 off the price of an average home. If you’re selling, you should declare any problems you’ve had on a Seller’s Property Information Form, otherwise you could face a claim later on.

While an increase in Council Tax might not be too much of a deterrent to a potential buyer, plans to grant permission for new homes, a mobile phone mast or wind turbines could knock an asking price down. If you're a buyer, the local council should have details of any future planning applications and you can search them for a small fee.

A lot of traffic in an area obviously has an effect on air quality. Since 1997 each local authority in the UK has carried out studies of the air quality in its area. If an area falls below a national benchmark for air quality, it has to be declared an Air Quality Management Area (AQMA). Some residents of the Llandaff area of Cardiff expressed concern that it had become an AQMA due to an increase in traffic in the area. Whether this becomes a widespread issue remains to be seen.

Mortgage availability is a key driver of property prices. If no-one can take out a mortgage, then prices will stall and eventually fall. We've seen this happen in parts of the UK in recent years, as lenders tightened up their criteria following the credit crunch. Conversely, good mortgage availability will mean more people are competing for properties - to a seller's advantage if their home is desirable.

An outstanding local school can add around 8% to the value of a home, according to the Royal Institution of Chartered Surveyors. On the flipside, a not so good Ofsted report can take off a similar amount. If you’re concerned about a school’s performance, one way to get involved is to become a governor.

Initiatives such as the Help To Buy scheme have been credited with pushing house prices up. A buoyant economy with strong employment gives people the confidence to buy and leads to an upward shift in house prices, while rises in unemployment have the reverse effect. Planning restrictions, at both a national and local government level, affect the number of homes in a particular area.


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