News
Glenigan: Housing market prospects
19/01/2010
The housing market has stabilised progressively over the last six months after the sharp falls in prices and activity seen over the previous two years. Private housing starts have also improved as housebuilders have sought to capitalise upon the modest upturn in the market. However, market conditions remain fragile and the recent recovery in prices is widely expected to loose momentum over the coming months.
The Halifax estimates that average house prices in December were 1.1% up on a year ago: the first annual rise in prices since February 2008. The annual rise follows a gradual improvement in property transactions from their lows during the first quarter of 2009. The number of mortgage approvals granted in November, a useful proxy for property transactions, stood at 60,000: twice the levels seen at the beginning of last year. The pick-up in mortgage lending, coupled with a shortage of available second hand properties, has helped lift house prices.
Glenigan has also recorded a rise in private housing projects starting on site during the closing months of 2009. Whilst the value of project starts fell 11% during 2009 as a whole, project starts during the final quarter were 6% up on a year earlier as housebuilders anticipated a further brightening in market conditions during the current year. Furthermore, the flow of private housing planning applications and approvals has also stabilised, despite developers also having a large pool of stalled schemes to draw upon. The number of planning applications during the final quarter is provisionally estimated to be 6% up on the previous three months, although still down on a year earlier.
Against this background, we anticipate a further strengthening in private housing starts over the course of this year. However, the recovery in the wider housing market remains fragile. Whilst the recent recovery in market turnover is likely continue, the rise in house prices is widely expected to loose momentum as the supply of available property improves. Furthermore any renewed weakening in the UK economy or potential rise in bank base rates from their current extremely low level would quickly erode market confidence.
Check out the CIMCIG February 10 event on the housing market - http://www.cimcig.org/events.php?id=247
Reproduced from the Glenigan subscriber newlsetter with kind permission. See the full newsletter at http://www.glenigan.com/newsletter2010/jan12th2010_custnews.asp
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