House prices surge by 8.8%

House prices surged by 8.8% annually in June in the strongest uplift seen since 2007 as consumer confidence continues to rise, Halifax has reported

%VIRTUAL-SkimlinksPromo%House prices surged by 8.8% annually in June in the strongest uplift seen since 2007 as consumer confidence continues to rise, Halifax has reported.

The increase took the average UK house price to £183,462, although on a month-on-month basis prices slipped back by 0.6%, marking the fourth monthly price fall seen since last December.
The year-on-year uplift in property values has accelerated on an 8.7% annual increase recorded in May and marks the biggest year-on-year jump seen since October 2007, the figures show.

A year ago, in June 2013, house prices were increasing annually at less than half the pace they are now, by 3.7%.

The latest 0.6% monthly drop in property values marks a large swing backwards from a month-on-month increase of 4% recorded in May.

Halifax said month-on-month price changes can often be "volatile" and its quarter-on-quarter measure of price fluctuations is a more reliable indicator of what is happening in the market.

This quarterly measure revealed that the underlying direction for house prices is still pointing upwards. Property values between April and June this year were 2.3% higher than they were between January and March.

Halifax said that this measure has remained steady since June 2013, with quarterly increases ranging between 2% and 2.3% consistently recorded over the last year.

Stephen Noakes, mortgages director at Halifax, said: "Housing demand continues to be supported by an economic recovery that is gathering pace, with employment levels growing and rising consumer confidence, although real earnings growth remains sluggish."

Last week, building society Nationwide reported that its house price study was showing that values have surpassed their 2007 peak to stand at a new all-time average high of £188,903.

Nationwide said London property values have surged by nearly 26% year-on-year, leading some economists to warn that the risk of a sharp correction in prices at some point in the coming years is growing.

There have recently been signs that some of the strongest heat is being taken out of the housing market, following the introduction of toughened lending rules at the end of April, which force lenders to question home buyers and people looking to remortgage more deeply about their spending habits.

Lenders also have to apply "stress tests" to make sure applicants would still be able to afford their home loan repayments as and when interest rates rise.

Experts have said it is too soon to know whether the impact of these new rules will just be temporary, as they bed in.

The Bank of England has also recently announced new curbs on riskier lending. It has said that loans of 4.5 times a borrower's income or higher should account for no more than 15% of new mortgages issued by lenders.

The Bank also said that lenders should ensure that borrowers can keep up their mortgage repayments in the event of a rise of up to 3% in interest rates over the first five years of the loan.

Halifax pointed to figures from HM Revenue and Customs, which showed that home sales dipped to under 100,000 in May for the first time in six months, although transactions were still up by 15% compared with May 2013.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "With estate agents reporting that applicant levels are falling, fewer sealed bids and packed open houses, some moderation is returning to the market.

"As more property comes up for sale, with vendors worrying that they may have missed the boat, the heat has come out of the housing market."

He said speculation about the possibility of interest rates rising is also prompting potential buyers to act more cautiously when faced with sellers' asking prices.

Howard Archer, chief UK and European economist for IHS Global Insight, said that a limited supply of homes on the market is still likely to be a significant factor which continues to push up prices in many areas.

He said: "We currently see house prices rising by around 6-7% overall in 2015.

"Slowly rising interest rates, more stretched affordability ratios, due to the marked rise in house prices, and the Bank of England's recently announced macroprudential measures aimed at ensuring lending responsibility are seen taking some heat out of the housing market in 2015.

"In addition, it is likely that more houses will come on to the market."

The people who affect house prices
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House prices surge by 8.8%

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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