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House prices still rising in an uncertain market

House prices rose by 0.5% in May according to the latest survey from the Nationwide Building Society. This pushes up the average price of a home in the UK to £169,162 which is an increase of £15,000 on the same month last year. This means that prices have now risen in 12 of the last 13 months.

According to Martin Gahbauer, the Nationwide’s chief economist: “Since reaching a trough in February 2009 – following a drop of 19.3% from their October 2007 peak – house prices have risen by 12.2% and are now just 9.5% below the October 2007 peak.”

He also went on to say that: “Housing market conditions remain characterised by thin transaction volumes and a relative scarcity of properties for sale, despite a slow return of more sellers in recent months. The current supply-demand balance on the market is still consistent with relatively stable to modestly upward trending prices.”

But could the supply of houses be boosted over the coming months? With a Budget coming out this month from the new coalition government, we know that they plan to raise capital gains tax from a current level of 18% to 40% or even higher for top-rate taxpayers. This will raise the costs for people with second homes and also buy-to-let landlords. If there is any gap in the Budget between the announcement of the new capital gains tax regime and its implementation, then some home owners may take the opportunity to try to sell their properties quickly, thus boosting supply.

Also, the abolition of the home information pack in recent weeks has lowered the cost of vendors putting their house on the market, and this too may give an impetus to housing supply.

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Posted in Housing

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