House prices continue to grow in the UK, as completions fall
The latest House Price Index from Halifax shows that the prices in the UK residential market are continuing their upward trend. This demonstrates the stability of the residential property market, which had witnessed a slowdown during mid-2016 given several developments.
The house prices in December 2016 and January-February 2017 were 5.1 percent higher than the corresponding period a year ago. On a sequential basis, the house prices grew by 1.7 per cent. Halifax has attributed the growth in prices to low supply of new homes and existing properties available for sale. At the same time, employment is growing, and the number of aspiring homebuyers is increasing.
Another major factor responsible for pushing the prices upwards is the mortgage affordability compared to a decade ago. “The proportion of disposable earnings devoted to mortgage payments – has improved by 18 percentage points since 2007. Typical mortgage payments for new borrowers (both first-time buyers and home-movers), at the historic average loan to value ratio, stood at 30 percent of earnings in 2016. Quarter 4 compared to the peak of 48 percent in 2007 Quarter 3,” Halifax said, and this is the main reason for the number of first-time home-buyers to swell in the last two years.
The home sales are also growing in the last two months with January recording 4.9 per cent growth over December 2016. For the fourth consecutive month, there has been a growth in house sales. The house sales in January equalled to that of January 2016. This clearly establishes the fact that the house sales continue to remain stable as demand outstrips supply.
The problem of supply continues to impact the housing market. Data revealed by the Royal Institution of Chartered Surveyors indicated that average stock levels of houses for sale remain close to historic lows. The number of properties coming to the market is falling month-by-month, and this trend is visible for the last 11 months. If the same trend continues, then, it will adversely impact the affordability of homes, as more number of aspiring buyers will be forced to remain out of the housing network.
To make matters worse, house completions are also falling. For instance, house completions fell by 4 percent during the last three months of 2016. The overall completions were 1 per cent less than 2015. A combination of several factors is contributing to the housing crisis in the UK. If the stakeholders concerned do not come up with interventional measures from a long-term perspective, the crisis will spiral out of control.
Source: Halifax House Price Index
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