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Assetz House Price Watch February 2008

Assetz House Price Watch is the only fully inclusive summary of all the major UK house price indices, providing a comprehensive overview of market activity

The five major UK house price indices show an average of 5.4% annualised growth for the twelve months prior to February 2008. This shows a continuation of the annual rate of growth recorded in January 2008 (5.4 %) but still a reduction of 5.1% from the February 2007 annual growth rate of 10.5 %.

In addition, the longer term shows the possibility of the rate of house price growth having stabilised in a similar way to September 2005, although it is too early to be sure of this in view of the recent turbulence in the financial markets.

Annual house price growth stabilises…

Annual house price growth in February held at 5.4% for the second month running, indicating a stabilisation in the market and marking an end to the slowdown in annual house price growth. This month’s annual growth represents a turning point in the current market, providing a clear indication that we are likely to witness an upturn in house price growth as soon as next month.

Average house price climbs…

The monthly, average UK house price grew 0.7% in February, the first positive monthly increase in price since October 2007. This indicates a return to strength across the UK residential market and provides further evidence that the downturn seen in recent months is simply part of a stabilisation process and not a market crash.

Buy-to-let investors secure best deals…

It is clear from the latest figures released by the Council of Mortgage Lenders (CML) that buy-to-let landlords have stepped in to replace retreating first-time buyers and to support the market, undeterred on the whole by the scare stories circulating the property market and taking advantage of their improved negotiating power. Buy-to-let landlords are proving a better credit risk than the average homeowner and as a result, lenders have relaxed their criteria, with required rental income dropping from 125% to 120%. It now looks likely that many buy-to-let lenders will even permit experienced landlords to borrow on the basis of just 100% cover going forwards, once long term rental growth becomes a matter of fact.

Bank of England plays a dangerous game…

Yet again the Bank of England chose to ignore the clear and present danger of the credit crunch by delaying a further base rate reduction in March. We are witnessing a tightening up across the credit markets and immediate action was called for. In light of this, the MPC is likely to agree a full 0.5% drop at April’s meeting or even an inter-meeting base rate reduction as early as this week.

Average UK house prices …

The average house price in February 2008, taken from the average price provided by all five major indices was £213,430, up from £211,472 in January 2008. This shows an increase of £1,958 in the value of the average property and an increase of £10,519 in the twelve months from February 2007, when the average price of a home was £202,911.

Stuart Law, Chief Executive of Assetz, comments:

“Have we witnessed an end to the reducing rate of house price growth? With annual house price growth stabilised at 5.4% for the second consecutive month, and monthly house prices up 0.7% in February - quite possibly.

“The Rightmove house price index, which proves a good indicator of the property market (due to it recording initial asking prices rather than final sale prices), jumped 3.2% (£7,500) in February. Rightmove is also a leading indicator of what may happen in other indices later in the year, as mortgages get approved and the land registry records sales. I anticipate that we’ll see a continued stabilisation and even an upturn in monthly house price growth over the following months, with annual growth still likely to stabilise at around 5% for the year.

“The supply/demand imbalance is simply not going away, and is showing very strong signs of worsening in the short to medium term, with huge (40%) falls in new development making prolonged price falls a very unrealistic outcome due to the normal laws of economics. I strongly suspect that many will be surprised by a return to house price growth sooner rather than later but the remaining risk to stability is the credit crunch, as the result of banks’ greed continues to unwind. This remains the greatest risk to the housing market and the economy as a whole at present.”