House prices rise in first quarter of 2010

29 April 2010

After an erratic start to 2010, house prices have finished the first quarter of the year 1.6% up from the final quarter of 2009, according to Nationwide's quarterly house price report.

Now only Northern Ireland is still experiencing a dip in prices over the year, down 3%.

On average, UK house prices grew 0.7% in March and now stand at £164,519. This almost reverses the 0.8% dip experienced in February after the bad weather at the start of the year.

Martin Gahbauer, chief economist at Nationwide, says: "The last two months are consistent with a relatively flat profile for house prices, and in line with the recent drops seen in buyer enquiries and house sales.

"With greater-than-usual political and economic uncertainty ahead of the upcoming general election, potential homebuyers are proceeding cautiously."

London's average house price increased 2.5% over the last three months, making it the top-performing region for two consecutive quarters. However, this comes at the expense of affordability.

The ratio of London prices to the rest of the country has risen from around 1.5 in the first quarter of 2005 to 1.75 now.

Gahbauer explains that this was due to a more acute supply shortage in London and greater overseas demand for property in the region. "[The area] will have benefited from the fall in sterling, which has made investing in UK property more attractive.

"More recently, the recovery in the financial sector is also likely to have boosted demand for property in the capital," he says.

Meanwhile, Halifax puts the average house price increase in the first quarter of 2010 at a much more modest 0.6%.

Martin Ellis, its housing economist, says: "This was smaller than the 3.6% rise between the third and fourth quarters of 2009, suggesting a slowdown in the trend rate of house price growth.

"The return of the lowest stamp duty threshold to £125,000 affected housing demand at the end of 2009 and in early 2010. The bad weather also had an impact at the start of the year."

However, stamp duty for first-time buyers has been scrapped for properties bought for less than £250,000, following the Budget at the end of March.

According to Halifax, at £250,000 more than nine in 10 first-time buyers would have been exempt from paying stamp duty in 2009, compared with just over half if the lowest threshold had been £125,000.

However, Richard Morea, mortgage adviser at London & Country, is not convinced that the move by chancellor Alistair Darling will have a major impact on the housing market.

"Those who continue to struggle to raise the sort of deposit now required will not see it as any great incentive. The stamp duty window alone will not be the answer," he says.

Acadametrics posted a 1.1% increase in residential property transactions completed in England and Wales during March; the 11th month in succession that the index has increased.

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