House Prices are on the Increase but are they Realistic?


Louise Misiewicz

Tax Consultant

2nd July 2013

Posted by Simon Misiewicz on 1st July 2013

In May I wrote an article that suggested that the number of mortgage applications had increased. Indeed they continue to increase and as a result have now increased house prices.

A case of the old classic “supply and demand”.

UK house prices have continued their upward trajectory during the course of this month, rising by 0.4% to £167,912 (4). The Council of Mortgage Lenders (CML) has suggested that mortgage lending has increased by 21% since April 2012 (1).

The number of mortgage applications in April 2013 saw an increase of 60% compared to the same time last year (2).

These figures are echoed by Nationwide who saw their own lending increase by 17% (3). 

If more people are buying properties then what do you think will happen to house prices?

Fears that George Osborne’s Help to Buy scheme could lead to a new housing bubble have been exacerbated by new figures showing that house prices grew faster in May than at any time in the past six years (8).Mortgage rates have fallen since August 2012.

Currently a two-year fixed mortgage rate stands at 3.82%, compared with 4.66% in May 2012. Chief economist at the CML, Bob Pannell, said: “The comparison with April last year, 21% higher, is flattered by the temporary dearth of house buying activity immediately following the closure of the stamp duty concession”.”The true underlying position is that April 2013 is likely to have been one of the strongest months for lending activity since late 2008, but not as strong as the year-earlier comparison suggests.

Gross lending on a seasonally adjusted basis has been running comfortably above £12 billion for several months, but this is still barely half the average level of lending seen in 2003-4.” (1)Brian Murphy, managing director of the Mortgage Advice Bureau, said: “What comes next in the development of Help to Buy, will determine just how many people can join the rush to secure a good deal on property, whether or not they are first-time buyers or second-steppers.”We are still waiting to see how the mortgage guarantee will work in practice, but in the meantime the competition between lenders means there is plenty of reason to shop around and seek advice to secure a favourable offer” (2).

The increase in property prices, especially in London can be put down to the number of foreign investors looking for a safe investment compared to Europe and Asia (7).Residential properties are taking 86 days to sell on average, 5.6% faster than in quarter four of last year.

“Move with Us” stated rising asking prices and numbers of listed properties suggests that sellers are growing more optimistic. “If seller optimism is not met by a rise in buyer demand, any increase in asking price is generally met with longer sale times,” the report said. (5)London house prices went past the £500K mark this month being 8.6% higher than a year ago and twice as much as the national average house price.  However, Yorkshire and East Midlands saw falls in house prices dropping 1.1% and 0.6% respectively in the month of May 2013. (6)Albeit the house prices are increasing one would have to ask themselves, is this realistic? How can house prices be on average £250K and yet wages and salaries are decreasing below circa £30K.

This means that house prices are verging on a 10:1 ratio.

Is this sensible?  Is it sustainable?

I will hear people say that house prices have doubled each 15 year period. I would agree with this, but then there was always a strong correlation to wage earnings. As we all know unemployment is still high and wages have decreased rather than increased in recent years.If you contact Simon this month he will provide you with a free “Property Investment Evaluation” session via Skype to look at your potential property investments to make sure that you are getting the best returns on your money.

For more information please contact us on 0115 946 1991 or Clik Here to email

References:(1)Lending up on Year
(2)An Increase In Mortgage Applications
(3)BBC Property News
(4)Rise In House Prices During May 2013
(5)Increase In Average Asking Price
(6)House Asking Prices Reach New High May 2013
(7)OECD British Property Prices Are Too High
(8)Help to Buy Fueling Boom In Property Prices

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