FURTHER evidence that property prices continued to rise at the end of last year emerged yesterday but the outlook for 2010 looks less rosy.
The government’s housing survey, compiled by the Department for Communities and Local Government (DCLG), reported that house prices rose by 0.6 per cent in November compared to 12 months ago. Average house prices rose to £200,454, which is an increase of more than seven per cent since March, when the average price was £187,193.
The survey found that house prices were buoyed by low interest rates and weak supply as people waited for more news that prices were rising before committing to selling their houses.
“Virtually all house price measures, including the DCLG, indicate that house prices troughed around March (2009) and have been firming ever since,” said Howard Archer, chief UK economist for IHS Global Insight.
The price increase was welcomed by David Brown, commercial director of LSL Property Services, who said that buy-to-let investors did particularly well last year. He said: “The modest recovery in house prices in 2009, together with rental income remaining steady, meant property once again brought a tidy return for the buy-to-let investor.”
However, the DCLG survey could be the last bit of good news for the housing sector according to Archer. Rising unemployment and stagnant wage growth has made house prices less affordable he says, and the house price to earnings ratio rose in December.
Archer said the housing market could tip in favour of buyers later this year as more people put their homes on the market. “A relapse in house prices will be likely if the recent firming trend leads to more properties coming onto the market,” he said.