Nationwide: house prices stagnate

Today saw the release of Nationwide's figures for July on UK house prices. According to the leading mortgage lender, house price growth appears to have come to a halt, with prices rising by just 0.1% in the month as a whole.

The results mean that the annual rate of growth dips to 9.9%.

In other news, the British Bankers' Association report that mortgage approvals have also fallen significantly - down by 11% on a year-on-year basis.

Bradford & Bingley, a lender who are heavily involved with the buy-to-let market, seem to give a differing opinion on the state of the market. They suggest that the buy-to-let market was very strong in the first six months of the year (January to June) and that they expect the second half of 2007 to see similarly strong sentiment among buy-to-let investors.

As ever, it seems that we get different signals depending upon who we listen to.

To see whether the reduced rate of house price growth is significant, it's interesting to compare how the market has performed in July during previous years. The table below gives the figures for monthly growth in July for the past 15 years:

1992: -0.4%
1993: -1.2%
1994: +0.9%
1995: +0.3%
1996: +0.3%
1997: +1.6%
1998: +1.3%
1999: +0.8%
2000: -0.2%
2001: +1.3%
2002: +2.2%
2003: +0.9%
2004: +1.9%
2005: +0.3%
2006: +1.1%
2007: +0.1%

Interesting times ahead it seems.

Northern Rock predict house price slowdown

Northern Rock, the UK mortgage lender, have suggested that house price inflation will slow quite suddenly by the end of 2007.

Although house price inflation is currently running at about 10%, the lender suggests that this level is likely to fall quite dramatically - by the end of the year, it may be that house price inflation drops to nearer 4%.

This is an interesting statement, as we are already seeing that the headline rate of house price inflation (HPI) hides regional differences. For instance, both Northern Ireland and Greater London are performing at well above the headline rate of growth.

In order for the overall rate of HPI to fall to 4% by the end of December, it would surely involve some relatively large decreases in house prices in some areas (particularly when you take into account the current rate of inflation).

Rising interest rates are undoubtedly already hitting affordability in some areas and it will be interesting to see how the Bank of England react to news that house price growth is showing clear signs of slowing. Will they feel the need to keep increasing interest rates, or do these indicators suggest that interest rates are about to peak?

Panorama: Immigration Issues

The Panorama programme shown on BBC1 earlier in the week mentioned some issues that could be relevant to the future of the housing market. The main focus of the half-hour show was on the fact that the UK government don't seem to be keeping count of how many immigrants (both legal and illegal) are arriving in the country.

Using the example of Slough in Berkshire, the programme makers noted that migrants arriving from Poland were living in unusual circumstances - with many adults being packed into relatively small houses, while others were living in converted sheds (sheds converted illegally by their landlords).

One figure that was thrown up was that there are thought to be some 500 more people arriving in the UK each day than there are leaving. That really caught my eye because of the potential impact on housing demand. If the figure is correct then it would mean that the net effect of migration alone on the UK population would be to increase it by more than 180,000 people on an annual basis.

Whilst many people who are new to the UK may not be able to afford to purchase a house, they are potential tenants for buy-to-let landlords. Will it be enough to keep levels of demand running high though?

Housing Market Still Going Strong?

It seems that news on the UK housing market has been swinging from one extreme to the other. Last week we saw plenty of news, following the latest rise in interest rates, suggesting that house price growth was slowing and that a crash might be on the horizon.

Some analysts have suggested that UK home-owners have got themselves into too high a level of debt and that we may struggle to meet mortgage repayments, given higher interest rates and greater expenses in other areas (for example, rising household bills and petrol prices).

One argument that had been put forward by those promoting the idea that the UK housing market would continue to perform strongly was that demand would continue to out-perform supply, pushing house prices still higher. Gordon Brown's announcement that he planned to build more houses suggested a growth in supply, though some suggested that it would not be enough.

So...what is being said by analysts this week? The news agenda has been dominated by HBOS (Halifax - Bank Of Scotland) announcing that they have adjusted their estimated for house price inflation. They are now suggesting that the average cost of a UK home will have risen by some 6% by the end of 2007. This would mean a rise of some £12,000 on a property valued at £200,000 in January.

Such a rate of increase is still slower than previous years but does hide regional differences. London house price growth is still predicted to remain strong (at around 12% for Greater London), while Northern Ireland continues to see the fastest rate of growth.

HBOS also see a further interest rate rise in the near future (taking the base rate to 6%), although they appear to be predicting that this will be the peak for UK interest rates. Maybe too optimistic a view?

New PM to target housing

The new Prime Minister, Gordon Brown, is to make a speech in the House of Commons this afternoon where he will outline the key priorities for his Government.

It's thought that the PM will target at the UK housing market when it comes to new policy decisions. In comments made to the BBC, Mr Brown has already suggested that his housing plans will involve making property more affordable, with plans for more house building.

One idea that has been widely touted in the press is that the Government will look to mortgage lenders to offer longer fixed term mortgages. It's a policy that is already under fire, with some lenders suggesting that such mortgages are not wanted by borrowers.

There are also suggestions that the PM will reveal plans to build more houses on brown-field sites. It will be interesting to see the actual details for such plans, as a policy of building on brown-field locations wouldn't necessarily differ from the policies of Mr Blair. Many would-be first time buyers and others with an interest in the UK property market will be listening with interest.

Interest Rates: Paper Review

The morning after the rates rise of the day before. Let's look at what the UK nationals have to say about interest rates and the housing market:

The Times leads with a story suggesting that the interest rate rise heralds that the cheap mortgage era ends, with many homeowners about to come off fixed rate mortgage deals over the next 18 months. They also offer advice on softening the blow.

The Telegraph suggest that Tony Blair's legacy is to have left a nation deep in debt, with millions paying a third more for their mortgages.

In The Guardian you can find analysis of the warning signs that are apparently flashing. It reports that two members of the MPC are concerned that interest rates are rising too aggressively.

Finally, the Independent concentrates on warnings from the Conservative Party that personal debt is spiralling, in the face of the interest rate rises.

UK Interest Rates Rise

No great surprise today with the news that UK interest rates have risen by a quarter point to 5.75%.

The Monetary Policy Committee issued a warning about concerns over the continuing rate of inflation, which some analysts believe may indicate that there will be a further interest rate rise in the near future. Indeed, some had already speculated that this month's decision could have led to a larger increase.

Businesses have reacted by warning against further increasesm suggesting that the 5 rises in the past year are still filtering through and will lead to a decrease in the rate of inflation anyway.

Is the glass half empty?

The way in which house price movements are being reported in the national newspapers provides an interesting study in market sentiment. For some, the housing market remains strong and property, as an investment, looks like a pretty good bet.

Others are rather more pessimistic and are looking for a slowdown at the very least. Some are even looking to a house price crash resembling that seen in the UK in the late 1980s.

The Telegraph pick up on recently released figures from the Halifax to note that property prices in Northern Ireland have risen by an astonishing 50% in the past 12 months. Indeed, the last quarter of 2007 saw a rise of almost 9% in the value of an average property in Northern Ireland.

The chief executive of the Halifax is reported as suggesting that UK house prices will continue to remain strong, partly due to a lack of supply of housing stock.

The Times, however, take a different approach. They report on information produced by Nationwide and comments from the Chief Executive of Nationwide, Graham Beale. Mr Beale predicts that there will be a downturn in the UK housing market, with prices set to grow by between 5% and 8% in 2007 as a whole.

This lower than might be expected growth is predicted as it is felt that there will be a slowdown in the second half of the year, brought about by increased borrowing costs as a result of recent interest rate rises.

Interest Rate Rises Taking Their Toll?

Much of the debate in the media right now seems to be surrounding whether or not the recent interest rate rises are likely to lead to a significant cooling off in the housing market. If house prices are to fall (or if they are to rise at a slower rate, at least) then it's likely to occur in conjunction with a slowdown in consumer spending.

The news from Reuters that many people are skipping bill payments may be an indication that some of us are finding ourselves in a slightly tighter financial position than we might like.

It seems that more of us are not paying our Council Tax bills on time (as well as other utility bills), with the suggestion being that late bill payments are down to many of us finding it that little bit harder to keep up with mortgage repayments. Scare-mongering or an important indicator? We'll have to wait and see.