The UK economy has just emerged form the longest recession since the Great Depression preceding WWII. And, although it is early days for the overall economy (achieving just 0.1 per cent of GDP in the last quarter), house prices are showing signs of stable and consistent recovery.
Technically, the UK is out of recession but the effects of the economic downturn are still being felt and will take some time to reverse the negative trend. However, as consumer confidence grows the housing market grows with it, and as stability returns to the financial sector more people are able to secure mortgages to afford their ideal homes.
Figures from Nationwide show that house prices increased by 1.2 per cent (seasonally adjusted) in January 2010. This increase in prices is reflective of the property market's long-time position as a barometer for the economy as a whole.
Despite unemployment remaining high, and many experts expecting the situation to remain static for some time, affordability of homes is on the increase. Furthermore, the inflation rate exceeds wage growth.
However, increases in prices have the current average house price in the UK sitting at £163,481 with the average annual house price inflation now 8.6 per cent. All of this is good news for the housing market as well as homeowners. However, it is also beneficial for those seeking to buy a new home.
With the market on the rise, consumers investing in a new family or personal property can expect a strong return on their investment as the economy picks up. Furthermore, the burgeoning housing market allied to the (albeit slowly) recovering economy is driving competition and choice, giving consumers a wider selection of property as well as an increase in mortgage products.
According to the British Bankers Association, there was recently an upturn in the number of people seeking a mortgage at the end of 2009. They suggested this was due to the impending end of stamp duty relief. However, the ongoing rise in house prices suggests that demand currently outweighs supply and the market is benefiting form renewed consumer confidence.
The current climate of rising house prices does raise a few questions though, amongst them, why are house prices rising so soon after the economy emerged from recession? After the last price crash in the 1990s, prices fell for a few years before beginning to recover.
One of the suggested answers to this question is that the house building industry was quick to react to the economic downturn and reduced the number of new builds drastically - this had the effect of keeping demand within manageable levels. Without the high levels of overstock found in the US for example, the housing market quickly reached critical mass in supply and demand, resulting in positive growth and rising house prices.
Despite the house price to earning ratio remaining above average, it appears to be a good time to invest in a home. Those who can secure a good mortgage are able to buy a home in a growing housing market in which prices are expected to continue their current upward trend.
With house prices stabilising, learning about the trends we can expect in the property sector over the next year ensures that many home movers and first-time buyers can discover if their ideal house is a good investment.
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