UK house prices rise but autumn will be the 'true test'
07-15-2015
Property price growth nears 10pc in the East of England but London continues to lag behind the UK average
The ONS and CML data hints at a busier Autumn selling season but will that lead to house price growth?
Photo: Alamy
By Anna White
The average cost of a home in the UK crept up from £271,000 in April to £274,000 in May - to levels last hit at the peak of the market last summer.
Early signs, such as annual house price growth across the country, mortgage lending levels, and buyer demand all point to a busier autumn season in the housing market after the muted first half of the year.
House prices in London grew by 4.7pc in the year to May, a slower rate than the UK average of 5.7pc for the second month in a row, according to official Government data published on Tuesday.
Following a prolonged period in which London values surged ahead of the national average, house price growth in the capital has now slowed substantially, while prices in the East of England and the South East continue to race ahead.
New data from the Office of National Statistics (ONS) showed that the cost of the average home in the East of England jumped 9.3pc in the 12 months to May - the fastest rate of growth of any UK region - followed by the South East, where homeowners saw the value of their house increase by 8.2pc over the same time frame.
The combination of uncertainty ahead of the general election, sky-high house prices in the capital compared to the rest of the country, and tighter mortgage lending conditions imposed on London properties, has served to restrain the capital's housing market, according to Lucian Cook, head of residential research at the property group, Savills.
High house price growth in the East and South East has been driven by more families selling up and moving out of London in search of bigger homes and first-time buyers getting on the property ladder in the more affordable commuter belt.
"This is a tricky housing market to read but I suspect the London hinterland of Essex, Hertfordshire and Cambridge are pushing up the average house price in the East," said Mr Cook.
"The slightly lagged ONS data is showing a more sober spring selling market, which was disrupted by the general election, but we are starting to see positive indicators. The autumn will be the true test of the UK housing market."
For the UK overall house prices in the UK edged up 0.9pc from April to May, taking the average cost of a home to £274,000.
Prices in London nudged over the £503,000 mark.
The economist Howard Archer agreed that the "housing market is on the up".
This was backed up today by new data from the Council of Mortgage Lenders that showed a modest rise in mortgage lending from £15.8bn in April to £15.9bn in May.
“House purchase lending in May was slightly up on the previous month, suggesting the market might be waking up after a subdued first quarter. Activity has broadly been down on last year but we expect it to rise in the summer months as, with historically low interest rates and a competitive lending environment, borrowing conditions are relatively favourable," said Paul Smee, director general of the CML.
The latest sentiment survey from the Royal Institute of Chartered Surveyors (Rics) also reported a small spurt in demand adding to a growing sense of optimism among property professionals.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "The mortgage market continues to improve with the election uncertainty out of the way and buyers who may have put decisions on hold now more willing to take the plunge. We expect this to continue throughout the summer and into the autumn as people who have put purchases on hold emerge from their torpor."