House prices enjoyed their best run in February for over 18 months, say both Rightmove and Hometrack in their latest surveys. Elsewhere evidence mounts of the Buy to Let market surging too, with the beleaguered First Time Buyer seeing that first step on the property ladder become more elusive than ever.
Up to now, of all the house market reports, Hometrack has been the most pessimistic, often reporting the opposite to everyone else. So wide was the discrepancy in the readings that there had been occasions over the last couple of years when it seemed as if Hometrack was in fact reporting on a completely different market altogether. In January last year, for example, Hometrack said prices fell by 0.4%, while Halifax had them rising 0.8%. And, for a fifteen month spell ending last November, Hometrack had prices down every month, while Nationwide and Halifax reported modest rises during the period.
You can be sure, therefore, that if Hometrack has prices up, then the others must have them racing. And now Hometrack says February saw a 0.4% rise in house price. That’s the highest monthly increase it has reported since June 2004.
Richard Donnell, director of research at Hometrack said “It is a general shortage of homes for sale that really underpins the growth in average values over the last month. Prices are likely to continue to rise over the next month or so as a result of buyers returning to the market and supply remaining limited.’‘
Earlier last week, Rightmove said that prices surged a massive 2.7% in the month. That’s the highest increase the property web site has reported since October 2003. Its commercial Director Miles Shipside said “Buyers are back, particularly at the lower end of the market. We believe this will lead to further sales as successful sellers move up the property ladder. However, sellers must not get too ambitious or the recovery could run out of steam as afford ability is overstretched again.”
And while Hometrack and Rightmove repors on a property market that is seeing a high degree of rudeness returning to its health, other reports have suggested that buy-to-let Investors are returing in droves, with the Council of Mortgage Lenders reporting a record six months for mortgages to buy-to-let investors.
If anything this trend is likely to become even more pronounced in the months ahead, thanks to the lenders relaxing their criteria. Nationwide, is the latest. Until recently, it restricted lending to just two properties per landlord. Now the building society is prepared to provide lending for up to ten properties per investor. This news follows earlier reports that mortgage providers are now typically willing to lend against properties that are only expected to generate 125% of the payments in income. Previously, the lending criteria was limited to 130%.
But while the bulls start talking about buy to let investors boosting the property market providing long- term strength, with a shift from individuals owning their home to rental, it does seem to us that the commentators have overlooked a point
For over twenty years we were told that the reason why house prices were so much lower in France and Germany than in the UK was because renting was more popular in these countries. Why is it then that no-one has pointed out that the rise in popularity of buy-to-let, and the disappearance of First Time Buyers could lead to the UK market mirroring the markets in France and Germany, with runaway house prices inflation a thing of the past, and with prices crashing until the ratio of price to income is similar to the French and German level?
The British pre-occupation with house prices is seriously damaging the UK economy. The UK population seems to want to put every spare penny into property. Some individuals even suggest their home in their pension. It’s no wonder UK business investment lags behind that seen in competitor countries.
The UK badly needs a change in this psychology, with investing in business taking over from investing in property as the most popular dinner party conversation.
© Investment & Business News 2013