211: Just how hot is Britain's property investment market?
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One of the hottest dinner party topics is back on the menu with a vengeance -- but with indicators varying, just how fast are house prices rising?
A host of organisations trot out data on house prices every month. Indices from the Halifax and Nationwide are two of the better known.
Then, there are figures from the Department for Communities and Local Government (DCLG), not to mention the Financial Times House Price Index and statistics from property site Rightmove.co.uk, compiled from the asking prices of properties coming on to the market.
Rightmove's latest study, unveiled on Monday, showed that house prices in England and Wales surged at an annual 11.5 percent in October, taking asking prices to a record high.
Prices rose 2.0 percent month-on-month, pushing the average asking price to 218,954 pounds, up from 214,566 in September and beating the previous record of 217,580 set in July.
Latest figures from Halifax and Nationwide paint a more modest picture.
House prices rose by 1.0 percent in September, according to the Halifax, with the annual rate of inflation easing for the third successive month to 8.0 percent -- the lowest rate since April 2006.
The Nationwide earlier said the cost of an average home rose 1.3 percent in September to 169,413 pounds -- almost 13,000 pounds more than a year ago.
That brought the annual rate of house price inflation to 8.2 percent -- its fastest rate since February 2005, it said.
DIFFERENT METHODS
Confused? Although useful in giving a broad snapshot of the market, such property market studies tend to vary widely, owing to different samples of data and methodology: Rightmove's figures, for example, are not adjusted to take into account seasonal changes in the market.
Property investment specialist Assetz argues that monthly fluctuations in specific indices are not directly attributable to the sentiment of buyers, but rather the sample of the data used in that particular month.
There is, therefore, an inherent likelihood of each of these studies misrepresenting the market as a whole.
Assetz analyses data from six main house prices indices -- Halifax, Nationwide, Rightmove, DCLG, Financial Times House Price Index and the FT's mix-adjusted index -- to try to give a more accurate picture of how the market as a whole is behaving.
It pointed to average annualised growth of 8.1 percent for the 12 months to September -- an increase of 0.6 percent on the previous month and up 3.78 percent since the start of the year.
The average UK house price, again taken from the average price provided by all six indices, was 192,787 pounds -- up slightly from 192,626 pounds in August.
That represented an increase of 161 pounds in the value of the average home in the last month, and an increase of 12,621 pounds in the past 12 months.
OUTLOOK
So, what of the outlook? Over this, there is more widespread agreement.
Most economists agree that sound fundamentals, underpinned by a stronger economy and record high levels of employment, will continue to support a healthy housing market in coming months.
But the prospect of another hike in the Bank of England base rate -- taking it to 5.0 percent by the end of the year -- and soaring utility bills could put pressure on consumers' finances and curb housing demand.
As a result, many analysts expect annual house price inflation to moderate during the rest of 2006.
Halifax and Nationwide both forecast house price inflation of 5 percent for the whole of this year.
Assetz is more bullish, predicting growth of 7 percent for 2006, and upping its prediction for the following two years from 5 percent per annum to 8-10 percent, provided interest rates remain stable.
The Royal Institute of Chartered Surveyors (RICS) also anticipates annual growth of 7 percent this year, having raised its forecast in the summer.
Its latest property market study, which charts the views of its members, showed that house prices rose for the 11th consecutive month in September -- and at the fastest pace in four years.
Some 45.1 percent more chartered surveyors reported a rise than a fall in prices, up from 34.9 percent in August, and more than double the long run average of 21 percent.
"Essentially, house price inflation has picked up quite substantially in the last 12 months or so," RICS' chief economist Milan Khatri told Reuters.
"We think there has been a particularly sharp acceleration over the last couple of months and that will take some time to feed through into the (house price) data."
He anticipated another quarter percentage point rise in interest rates this year, followed by another in early-to-mid 2007, after which the market would begin to slow.
"Manufacturing and retail sales have picked up; that's feeding through to a strengthening labour market and economy -- the key factor driving the housing market," Khatri added.
However, Stuart Law, managing director of Assetz, attributed house price inflation instead to a continued imbalance between supply and demand, driven almost entirely by the government's immigration policy and "severe" local planning restrictions.
The expansion of the European Union to include the likes of Poland, Bulgaria and Romania would be the main source of house price growth in the coming years, he said.
"The Bank of England must be careful not to mistake the cause of house price rises over the next two years as being interest-rate led," he warned.
Source:
Reuters.co.uk