U.K. Home Prices Set Records

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U.K. Home Prices Set Records

 

MBA (2/23/2006) Sorohan, Mike

The U.S. is not the only place with a hot residential real estate market. Separate reports released this month pushed the average price of a single-family home in the United Kingdom past the $350,000 mark for the first time.

The U.K. Building Societies Association reported that lenders closed a record �23.03billion ($40.19 billion) in single-family loans as the average price of a single-family home rose by nearly 5 percent last year, to more than �200,000 ($349,000). And U.K. real estate Web site Rightmove reported that its February survey of buyer/seller activity found that the average asking price was �201,600 ($353,000) up by 2.7 percent from January.

The reports reflect a remarkable turnaround for the U.K. market, which as recently as 2004 was being talked about in terms of "heading for a crash" following a decade of steady house price inflation. At a U.K. BSA conference in October 2004, Roger Bootle of Capital Economics, London, predicted that U.K. housing prices would drop by as much as 20 percent over the next few years. However, while some areas did show house price declines in 2005, the overall market grew between 3 percent and 5 percent.

While that is good news for sellers, it's problematic for buyers, proving that housing affordability is an issue on both sides of the Atlantic. According to the U.K. BSA, average household income has not equaled home price appreciation, which has affected potential home buyers at all levels.

"First-time buyers drive the market. But second-time buyers, such as newly married couples and young families, are now struggling as well because prices have risen so much," the BSA's Rachel Blackmore told the U.K. Sun.

Despite this, Rightmove said high buyer demand and low inventory drove home prices. The average price of a single-family home rose by �5,281 ($9,205) from January to February, the largest monthly increase since April 2004, while the average time on the market per home fell from 94 days to 81 days. Miles Shipside, commercial director with Rightmove, said competitively priced properties in areas of limited supply are "flying off the shelves," often selling as soon as the come on the market.

"The market's picked up quickly this year. As a result, properties are selling more quickly and stock levels are declining," Shipside said. "House prices have stormed through the �200,000 barrier to record levels several months earlier than the market anticipated."

For the first time in 11 months, all property types saw prices rising in virtually every region of England and Wales, Rightmove said. The largest increases came at the lower end of the market, driven by growing demand for terraces and flats (condos/apartments). Agents report increasing numbers of first-time buyers, partly assisted by parental help with deposits as well as more flexible lending criteria, Rightmove said.

Not surprisingly, the London area has the most expensive single-family real estate, with an average home price of �296,712 ($517,000).

"Buyers are back, particularly at the lower end of the market," Shipside said. "We believe this will lead to further sales as successful sellers move up the property ladder. However, sellers must not get too ambitious or the recovery could run out of steam as affordability is over-stretched again."