House prices rise to highest on record in May

LSL/ACADAMETRICS ENGLAND & WALES HOUSE PRICE INDEX

  • Beats previous peak in February 2008
  • House prices up £6,125 higher than May 2012; sales up 10,000 year-on-year
  • But it is London driving most of the increase – northern regions are still struggling

House Price

Index

Monthly Change %

Annual Change %

£233,061

237.3

0.4

2.7

David Newnes, director of LSL Property Services plc, owner of Your Move and Reeds Rains estate agents, comments: “House prices rose in May to the highest on record. Even taking inflation into account, the record high price is symbolic of the significant improvement in the housing market over the past year. Prices are £6,125 higher than in May last year, sales are up 19%, and prices have only dropped one month out of the past eighteen. The catalyst for all this has been significant improvement in mortgage availability. Life for first time buyers is noticeably easier than it was six months ago. An abundance of great mortgage deals are on offer and lenders are more willing to lend to high LTV borrowers, which has led to a substantial rise in first-time buyer activity. Schemes like Help to Buy and Funding for Lending have acted like a steroid injection for the mortgage market and made it markedly stronger than last year.”

“But it is not quite as good as it looks. Take London out of the equation and the average price falls dramatically. The red hot London market is giving the whole property market a deceptively healthy glow. London still leads the way in terms of house price rises with growth in 31 out of 33 London boroughs annually and is the only region in England with average prices above previous record levels. The North/South divide is actually becoming more prominent as time goes on and as the London market is more exposed to a wider audience of potential foreign buyers, flocking to the capital. A strong economy is vital for the health of the property market and it is performing much better in London than other less resilient parts of the UK, which are suffering from public expenditure cuts. More needs to be achieved to help banks lend to new buyers, as a strong improvement in first-time buyer lending is the crucial catalyst for a full market recovery”.

“On top of that, the supply of mortgage finance is still constrained, despite improvements over the past year. Many buyers remain locked out of the market because they can’t afford to meet strict mortgage requirements and save enough for a deposit which is why cash buyers still account for a high proportion of the total number of sales. Lender’s caution will not disappear, as new regulations and controls continue to hamper their ability to lend. The only real solution is a sustained improvement in the wider economy which will help increase the supply of mortgage finance and improve demand for it.”

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