Blog Post

Is the housing market recovering?

David Boyd Nov 2, 2009, 14:23 PM

David Boyd, Managing Director, PAD4U Letting Agents Manchester writes:

With Nationwide reporting a 2% rise on year on year figures for October.  Is this a sign that the housing market is recovering?

"The last six months has seen a continued improvement in housing market sentiment on the back of rising demand and a lack of housing for sale," said Richard Donnell, director of research at Hometrack. "Prices have firmed and the discount between sales and asking prices is back to the same level it was at the start of the credit crunch over two years ago."

It may be too soon to call.  For instance month on month increases in property values have begun to flatten and as we enter into the winter months (traditionally weaker sales), we may see house prices stall perhaps.

The current market has also been unusual in that there are fewer instructions as people don’t try to list their house on the market, restricting supply and perhaps pushing prices up.  This likely to loosen up with more vendors put their property on the market.

Interest rates are also low and inter bank rates are normalizing, improving affordability.  However, large deposits are still required to get the best deals.  Given recent economic data we may see lower interest rates into next year.

The stamp duty holiday is soon to be over meaning stamp duty will have to paid on house price purchases between £125,000—£175,000.  Investors may wish to take advantage of the holiday before the end of the year.

Overall it’s very difficult to call whether we will see a double dip in house prices.  But investors should be taking a longer term view and basing their decisions on rental income (traditionally less volatile).  And although bank interest rates will become more attractive in the coming months, use realistic interest rates in their calculations.

There are good opportunities for investors with a long term view of the market.  In the short term leave it to the economists to judge where house prices will be in the coming months.

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