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House prices reach same level as September 2008

The price of a typical house in September 2009 rose by 0.9% to reach £161,816. This was essentially the same level as a year earlier, according to the latest house price survey by Nationwide.  Over the first nine months of 2009, the seasonally adjusted index of house prices has risen by 4.1%, though relative to the October 2007 peak it is still down by 13.5%.

 

According to Martin Gahbauer, Nationwide’s Chief Economist: “The further increase in house prices is very much consistent with improvements in a broad range of economic and financial indicators over the last few months, all of which suggest that the most intense phase of the recession and financial crisis has probably passed. However, given that the housing market still faces considerable headwinds in the form of high unemployment, restrictive credit conditions and an impending withdrawal of the stamp duty holiday, it would be surprising to see house prices continuing to increase at the very strong rate seen in recent months.”

 

House prices are rising, but in a very constrained market

House prices are rising, but in a very constrained market

Nationwide also pointed out that housing turnover is still well below normal levels. The housing turnover rate, which measures the percentage of the private housing stock changing hands on an annual basis, fell to only 3% at the end of 2008. It has now clawed its way back to 4% but is still well below the level of 8% which it stood at before the housing market crash. It is estimated that it could take another 18 months for it reach the pre-downturn levels.

 

Because the supply of houses is currently low and there has been some upturn in demand as more mortgages are being offered, this has been sufficient to cause some house price inflation. However, it is far from a normal market, and if more people are persuaded to try to sell then prices might fall back again.

 

 

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