Sales Market Update: Third quarter 2009
- 20th October 2009
- Selling Property News
At the end of the third quarter, interest rates stay down, property prices go up, and lenders warned to be cautious.
House prices have risen in the third quarter by 2.6 percent, according to the Department for Communities and Local Government (DCLG).
The figures, released by the Royal Institution of Chartered Surveyors (RICS), reveal that average prices rose 0.5 percent in August to its highest level since autumn 2007.
According to RICS, this significant rise is a result of the shortage of property on the market.
RICS spokesman, Ian Perry commented: "A lack of supply is still underpinning the rise in house prices with new instructions to estate agents only edging up very gradually.
"Meanwhile, despite the problems first-time buyers are continuing to encounter in securing finance, the level of enquiries from potential purchasers is increasing.
"‘This imbalance between demand and supply suggests that house prices will move higher in the near term."
In the South East, 52 percent of surveyors reported price increases rather than falls.
Other areas of the country are seen to be less stable, with price falls reported in Wales, Yorkshire, and Humberside
The improvement is most significant in the London market, where 79 percent of surveyors reported price increases.
The Council of Mortgage Lenders (CML) report a decline in mortgage lending by 5 percent in August, although this is still up by 30 percent on the previous year.
The Bank of England has announced that interest rates will remain at the 300-year low of 0.5 percent.
Furthermore, The Monetary Policy Committee (MPC) held the limit for quantitative easing at £175 billion. This is despite the advice of some sectors that believe this figure should be increased.
Although outlooks for the market are positive, economic weakness will keep further recovery unstable. David Kern, Chief Economist of the British Chambers of Commerce (BCC) stated:
"Large-scale job losses and the persistent weakness in lending to companies remain serious problems that must be resolved. Recent figures show that annual growth in lending to non-financial companies remains negative, and the pace of decline continues to worsen.
"To counter the threat of a relapse, we urge the MPC to increase the quantitative easing stimulus to at least £200 billion, and to consider a lower - or even negative - interest rate on deposits held by commercial banks at the Bank of England. This would penalise banks hoarding cash, and provide an incentive to lend to viable, credit-worthy customers."
According to a study by the Centre for Economics and Business Research (CEBR), interest rates will remain at this level until 2011. This will be good news for Buy-to-Let investors with outstanding mortgages.
The study further predicts that interest rates will rise gradually after this, reaching 2 percent in 2014.
CEBR also predicts the pound will weakened further against the US dollar. This may be good news for some looking to sell buy-to-let properties to foreign investors.
Buy-to-let investors are still warned to remain cautious despite the low interest rates, as mortgage specialist Richard Morea warns that interest on loans is unlikely to fall any further.
The level of enquiries from potential purchasers is increasing.
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