The data comes courtesy of the Royal Institution of Chartered Surveyors (RICS), but other data from the Halifax adds to the mood of optimism.

The RICS housing market survey is a good one.  Each month RICS asks estate agents: did house prices go up or down in your neck of the woods over such and such a period?  Well, they are not the precise words, but you get the gist. It takes the percentage difference between those saying up and those saying down, and this forms its headline index.

And in the past the RICS headline index has been a pretty good barometer. The index does not swing widely like surveys from the likes of the Halifax and Nationwide. In fact, if you turn the data into a graph it forms a nice smooth curve which is good at showing when the market turns.

In November the RICS index was still negative, with a score of minus 9, That was actually worse than last month when the index was minus 7, but the trend is clear for all to see.  If the RICS index proves to be as good a guide as it has in the past, UK house prices are close to rising again.

Drill down and the evidence mounts. The sub index tracking enquiries from new buyers is in positive territory too. In October the index stood at plus 17, in November it fell but at plus 11, was still pointing towards growth in demand.

Meanwhile, the sub index tracking new instructions – a guide of future supply – stood at plus 4 in November, down from plus 11 in October.

But then if you add evidence from RICS to evidence from the Halifax index, the story becomes more interesting. According to the Halifax housing index, November saw the biggest monthly rise in house prices in eight months. They were in fact up by 1 per cent month on month.

It is just that other data is not so clear cut, the Nationwide had prices flat, while Hometrack recorded them falling.

And frankly, while the RICS data is promising, the headline index is still negative. It is not yet pointing to rising house prices and it may not do so for a very long time.

Frankly a bigger puzzle relates to why house prices have not crashed.

The truth is that average house prices to income are still way above the historic average. And since real wages – that’s wages after inflation – are falling, it is hard to see how households can suddenly afford to spend more money on a home.

It boils down to mortgage availability, and the Funding for Lending scheme may be helping.

But actually, it may be a puzzle as to why house prices have not fallen, but it isn’t a very good puzzle. Record low interest rates and reluctance from banks to repossess properties have stopped the UK housing market from caving in.

So the market exists in a kind of limbo. When will the limbo come to an end?

Well it may end if we see a return to a noughties credit bubble. It may end in a few years’ time when inflation has eroded the cost of house prices so much that they start to look cheap, or it may end if the global flow of money and the relationship between global supply of saving, and global demand for investment changes, forcing up interest rates worldwide.


©2012 Investment and Business News.

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