The amount of homes sold in the UK over the past three months reached its highest level since January 2010 according to the latest housing market survey from RICS, the Royal Institute of Chartered Surveyors.
The survey which polls RICS own member surveyors says that sales are expected to rise over the next three months as more and more buyers return to the market.
House prices rise
In a similarly upbeat note, Halifax’s latest house price figures, out last week, showed that prices increased by 0.4% in May – the fourth consecutive monthly rise. House prices in the three months to May were 2.6% higher than in the same three month period a year earlier which is the biggest annual increase since September 2010.
However, it did point out that the tepid economic background continues to provide significant constraints on the housing market – this was backed up by a report this week from the Institute for Fiscal Studies (IFS) which showed that real wages have fallen more in the period since the recession began in 2008 than in any other 5-year period before.
Halifax added that while there has been an improvement in activity recently, home sales remain low by historical standards. To put things into context, overall mortgage approvals are still roughly half their pre-credit crunch levels.
Help to buy
The Government’s new help to buy scheme, launched in March’s budget, has no doubt contributed to the recent upturn by boosting demand for new build properties. The Homebuilders Federation said last week that the scheme had got off to a ‘flying start’ with 4,000 new homes having been sold since it was introduced. When it launched the scheme, the Government said the plan was to help up to 74,000 buyers in total so it looks like it’s been a positive start – certainly compared to previous, similar schemes.
The other key contributor to recent improvements is the Funding for Lending scheme which is designed to encourage more mortgage lending by lowering banks’ funding costs. It has helped fuel a mortgage rate price war in 2013 as lenders fight it out to offer the cheapest rates to borrowers.
New figures from the Bank of England show that the cost of a fixed rate mortgage at 75% loan to value (LTV) has fallen by around 0.8% over the past year – this is despite the Bank of England Base Rate staying unchanged at 0.5%.
The question now is whether these factors can help sustain a prolonged recovery in the housing market rather than a short-term boost. The likelihood is we’ll need to see improvements in the underlying economy as well as continuing growth in both the demand and supply of homes before we get to this stage.