House Prices Are Rising

House prices are continuing to rise to the highest level since 2006, with the cost of the average house going up by 1.1% to around £159,000. There were early signs that more people were beginning to put their homes on the market as conditions improved, a trend that could lead to a relapse in recent price rises.

‘Prices predicted to keep rising’:

The average cost of a UK home is now 7.1% higher than when house prices hit their low point in April 2009. The main reason for the rise in house prices in recent months has been due to a mismatch between supply and demand as buyers return to the market more rapidly than sellers.

The average house price in Britain is now around £150,000, which is about five times the average salary of someone in the UK. The recession has been the biggest impact on buying habits; the deepening turbulence on the financial markets has continued to deter would-be-buyers.

Despite swinging interest rate cuts that have reduced the Bank of England base rate to its lowest ever level of 1.5%, and the government's injection of billions of pounds into the mortgage market, buyers are likely to remain cautious, especially as the credit crunch prolongs the financial drain we are all encountering.

Reports into the future of the housing market have revealed many predictions, forecasting that house prices will start to recover in 2010 and then rapidly increase from 2011 – with the highest rise reaching 9.3%. The report also states that while demand is growing, supply of new housing is falling, with only 75% of the new homes required being built each year.

Home is where the heart is:

The place where you grew up is always going to be close to your heart, it holds many memories which you can’t take with you when you move house, so some home owners in the UK tend to stay where they are instead of moving and starting again – and with the added pressure of housing prices rising staying at home really could be the best option.

Although prices are still 4.1% lower than this time a year ago, this was the fourth monthly increase in a row and put the average house price up noticeably across the country. Even though the supply of property is beginning to pick-up, it is still insufficient to keep pace with the increase in demand which points to further prices gains in the near term.

As many people are uncertain about their future incomes and safety of their job during the recession they are cautious about spending hard earned cash on a new home, coupled with the fact that house prices are remaining high relative to earnings, just reinforces this more cautious approach among potential buyers.

Also with the lack of available credit for potential buyers, people can’t afford to splash out. Despite the further rise in house prices, there is hope that the house price rally seen since early 2009 cannot be sustained for much longer – but with signs that prices could continue to rise the housing market still has further to fall.