Mortgage News
House prices up 5.9% in 2009: Nationwide
House prices rose 5.9% in 2009 but 2010 will see no significant house price movements in either direction, according to Nationwide.
Its latest index showed prices rose by 0.4% in December and the average price of a home is now £162,103, up from £153,048 in December 2008.
Although house prices are still 12.2% lower than their October 2007 cyclical peak, they have now rebounded by 8.9% since their February 2009 trough.
Martin Gahbauer, chief economist at Nationwide, said prices rebounded because a significant amount of pent-up demand had begun to build up at the start of 2009.
He said that as interest rates hit record lows, potential buyers with enough cash to circumvent tight credit conditions re-entered the market, leading to a steady pick-up in housing transactions throughout the year.
The re-entry coincided with an extremely low supply of property available for sale, as low interest rates limited the number of distressed sales. This supply restriction meant that even a relatively modest pick-up in demand put upward pressure on house prices.
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Gahbauer added the other important factors in driving the house price recovery included a lower than expected increase in unemployment and emerging signs of economic recovery.
He said that the prospects for interest rates will important in determining the outlook for 2010. Further uncertainties surround whether cash rich buyers can continue to support housing demand and the outlook for the labour market.
He said: “Recent news from the job market has certainly been encouraging, with the latest figures on claims of jobseekers allowance even showing a decline for November. In the near term, the recent trend of stabilising employment conditions may continue. However, it appears likely that the public sector will eventually see significant job losses as fiscal policy is tightened.”
Gahbauer concluded that the 2009 recovery was driven by transitory factors which could lose momentum over the coming year.
However, he said: “There is no obvious catalyst on the near-term horizon that would trigger significant renewed falls in prices, such as a sharp spike in interest rates or a further pronounced tightening of credit conditions from present levels.”