So, is that it, housing market crisis over? Are the green shoots really blossoming into abundant life?
The house price index published by the Halifax this morning certainly seems to be the latest indication that it is. Prices rose 0.8% in August and are now up 4% since they bottomed out in April.
Housebuilder Galliford Try certainly seems to think so based on its plans revealed today for a rights issue to raise £119m and its judgement that the time is now right to ‘recommence our growth strategy in housebuilding’.
And the latest repossession stats seem to agree, with the total number of families losing their homes well down on the gloomy predictions made at the end of last year.
The house price index produced by the Nationwide showed an even stronger recovery than the Halifax. The average price rose 1.6% in August and are up 8.4% so far this year. That goes beyond any of the mini recoveries seen in the early 1990s and sounds more like a boom than a bust.
Not even the most gung-ho of housing market cheerleaders would have predicted that at the start of the year. But everyone was reckoning without the combined effect of all the stimulus measures in general and record low interest rates in particular.
Rates were cut to 0.5% in March and the effects on mortgage costs have been dramatic. According to the Halifax, typical mortgage payments for a new borrower have fallen from 48% of average disposable earnings in the third quarter of 2007 to just 29% now.
The Nationwide says the average interest and principal payment per mortgage holder has fallen from 38% of average post-tax income to 28%.
The other main reason for the recovery is lack of supply. Activity is still half the level seen in mid 2007 and the Nationwide says low interest rates have also reduced sales because fewer homeowners are under pressure to sell. Even though mortgages remain hard to get without a big deposit that shortage is driving up prices.
So does the recovery mean we will soon be back to talking about the affordability crisis? Record low housing starts - again confirmed in figures on orders for new construction today - certainly seem to suggest as much.
However, as Richard Donnell pointed out in Hometrack’s August survey, the national house price figures are being skewed by price rises in London and the South East, where the shortage of homes for sale is most acute. Prices were still static across 89% of the country.
The big questions remain what happens when the stimulus measures are withdrawn and what happens when rising prices tempt more sellers back into the market. Above all, how long can interest rates, again held at 0.5% today, stay this low?
Have your say
You must sign in to make a comment