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September 2014 Newsletter – House Prices Rise

September 24th, 2014 | No Comments | Posted in Monthly Newsletters

TMS
House prices rise as leaves start to fall

The expected summer dip that housing prices suffer every year, could be bouncing back earlier than expected. September has seen a month-on-month house price increase of 0.9% according to Rightmove, which suggests that the market is picking up after the quieter summer months. This looks like normal behaviour for a market that is being still propped up by the highly debated Help to Buy scheme and low interest rates that are set to remain at a historic low of 0.5% for at least the rest of 2014.
There is a catch. With the Mortgage Market Review (MMR) regulations at full force so close to the start of summer, it was always going to be difficult to assess whether a summer dip was a true reflection. Such an early bounce back in September, suggests there is a chance that prices could rise further than expected and that the normal summer lull was simply a delay whilst the adjustments to new regulations dampened the market’s demand.
If this is the case, there could be a significant increase in house prices, with many economists arguing that it is exactly schemes such as Help to Buy that has held demand stable and therefore prices steadier than otherwise might be, albeit also possibly keeping prices high. Cynics may see next year’s general election as an incentive for the government’s determination not to see any imaginary, or real, housing bubbles burst. The Bank of England reflects this assertion and is moving towards no change, with fears of forcing buyers into impossible and unaffordable scenarios, effectively freezing them out of the housing market.
Either way, there is still a trend towards rising prices across the UK, with an annual increase of 7.9% in the 12 months following July 2013. With wages mostly stagnant, it is no surprise that so many shoppers are turning towards the cheaper supermarkets in an effort to find the financial room to afford large deposits and potentially heavy repayments. It still remains to be seen where the next year will take us, but if interest rates remain as static as household income, house prices can only go up so far before the government, or the market, reacts.

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