2012 shows a modest rise in average prices but it was a year of two halves
House prices rise 3.2% on annual basis – a climb of more than £7,000
House prices remain stable in December
David Newnes, director of LSL Property Services plc, owner of Your Move and Reeds Rains estate agents, comments: “Taken as a whole, 2012 was the most encouraging year for the housing market since the financial crisis. Prices rose by more than £7,000 over the course of the year, and 2013 looks set to be a slightly easier year for mortgage lenders, which should help improve the availability of finance for house purchases and help boost sales figures.
“But 2012 was a year of two halves. In the first half of the year prices rose 3.2%, but the brakes were slammed down in the second half and brought prices to a complete standstill. The Olympics reduced sales activity in the late summer, and mortgage lending to first-time buyers also weakened over the autumn.
“It was also a year of geographic splits. The market in some northern regions remained in a state of near-paralysis thanks to the debilitating combination of public sector cuts, weak private sector growth, and a lack of mortgages for less affluent borrowers. In contrast, prices in the south of England, and particularly London, went from strength to strength during 2012. Prices in the capital soared over the course of the year and dragged up the overall national average on their coat tails. By boosting the national average house price, London disguises the weak state of the housing market in northern areas. If the capital is stripped from the figures, the average increase in house prices during 2012 falls dramatically from 3.2% to 1.4% – well below the rate of inflation.
“So it’s still too early to say if the market is sailing out of the financial storm just yet. The weather is improving, but there are still several chronic weaknesses preventing a sustained rehabilitation in sales and prices. Sales levels are still weak – there were 4,165 fewer sales this year than last year. Capital adequacy rules are too stringent. Economic growth is insipid. And mortgage lending criteria are too restrictive. In particular, tough requirements on the amounts of capital banks have to hold are crippling their ability to lend more to first-time buyers. More needs to be done to help banks lend to new buyers, because a significant improvement in first-time buyer lending is the one and only catalyst for a full market recovery.”