- Pace of annual house price growth has risen for the past two months; up from 5.2% to 5.5% in the last month
- Smaller homes prices are rising faster than ever – all because of head to head competition between first-time buyers and buy-to-let investors
- London is the hotspot this month; up 1.8% in the past month and up almost 10% in the past year
Commenting on the findings, Katherine Binns of HomeOwners Alliance says:
“The pace of house price growth is quickening – not only because there is a strong demand for homes because of low interest rates, but these prospective buyers have less choice as the number of houses coming onto the market remains at a record low. First-time buyers face extra hurdles as they are competing with the buy to let investors. In anticipation of interest rates rising in the near future, fixed rate mortgages are becoming the mortgage of choice*.”
This month’s House Price Watch indicates house prices are up on average 0.3% in the past month and up 5.5% in the past year
Rate of annual house price growth gaining pace
After an eight month slowdown, the pace of annual house price growth has risen for the past two months; up from 5.2% to 5.5% in the past month.
UK home sales increased by 0.8% between August and September to 106,030; a significant rise on the level of transactions last September — up 5.4% on the same period a year ago (HMRC data). Alongside renewed market activity, RICS continues to report shortfalls in supply. Rising house prices are expected to continue.
Shortage of homes an ongoing issue — competition for smaller properties is high
One of the factors potentially constraining the overall supply of homes for sale is that older homeowners lack suitable housing options to allow them to move.
Smaller properties are reported to be experiencing the most significant price increases as investors and first-time buyers compete for properties at this end of the market (Rightmove reports a 10% rise in this category in the past year). This is seen to be as a result of a shortage of properties coming to market with two bedrooms or fewer, combined with demand from both first-time buyers and buy to let investors (who recognise the huge rental demand for smaller properties).
In a recent statement by the Financial Policy Committee of the Bank of England, it flagged its on-going focus on the Buy to Let sector given its recent rapid growth, compared to the owner occupied sector.
Given the long term trend of rising house prices, interest rates are expected to begin to rise. In response to this, fixed rate mortgages have become the most popular product type in recent years. The Council of Mortgage Lenders suggests almost 90% of new mortgages were on fixed rates over the past twelve months and, among first-time buyers 95% of new mortgages were on fixed rates.
London is a particular hot spot this month
This month’s House Price Watch sees house prices up sharply in London (up 1.8%) and up almost 10% in the past year.
*The Council of Mortgage Lenders suggests almost 90% of new mortgages were on fixed rates over the past twelve months and, among first-time buyers, 95% of new mortgages were on fixed rates.
