UK residential property prices rose for a seventh consecutive month in January, increasing by 0.6% but the outlook for the year is flat, according to the latest index to be published.

Mortgage lender Halifax said that prices have now risen 9.9% since the lows of April 2009 and they are up 3.6% on the same time last year.

But the figures show that the price increases are slowing with January’s rise more modest than in any of the previous six months. Halifax also expects prices to remain flat in coming months as more properties are coming onto the market and it has been a lack of supply that has been driving prices upwards.

So although the pace of the recovery in the property market has surprised many commentators and means property values have retraced almost half their August 2007 to April 2009 decline there are now checks on growth.

‘A further increase in the supply of property is possible over the coming months, which would help to curb the upward pressure on prices,’ said Halifax economist Martin Ellis.

The Bank of England’s decision yesterday to put its quantitative easing programme on hold and keep interest rates at the historic low of 0.5% means rates are likely to remain low until the second half of 2010.

‘The marked reduction in interest rates over the past 15 months has, from a low base, boosted housing demand from those with a sufficient deposit to enter the market,’ said Ellis.

Others agree that price growth is likely to be muted. ‘We are sceptical that the marked rises in house prices seen since early 2009 can be sustained given a still far from favourable economic environment,’ said Howard Archer at Global Insight.

‘Future developments in unemployment, earnings and interest rates will be key factors to future movements in house prices,’ he added.

The average price of a house is now £169,777 compared with £154,490 last April. ‘Overall, our current view is that house prices will be flat during 2010,’ added Ellis.

Source: http://www.propertywire.com/

The number of new properties being built is increasing but they are still way below what they were a year ago and the situation is set to result in severe shortages in years to come.

The latest figures from the NHBC show that private sector starts are 36% on a year ago although they have reached the highest point in almost a year.

The warranty and insurance provider received 8,305 applications in June 2009 for builders to start new properties in the combined private and public sectors, the greatest number since July 2008, when 9,530 applications were received. However, private sector new starts (excluding housing associations) were down 36% on the same three-month period a year ago (20,973).

There is a significant fluctuation in the number of applications across the UK, with figures for some regions, including Greater London and Merseyside, more than 50% down on a year ago.

A shortage of new build housing will emerge particularly in the South East of England next year, according to the latest Knight Frank residential development review.

New build starts in the region this year are likely to amount to the lowest since the 1950s. When combined with the lack of supply in the second-hard market, caused by the number of potential vendors opting to ‘wait out’ the recession, this could lead to a real shortage of properties for sale next year.

‘Developers who opt to move now may be in the position of being able to sell into an undersupplied market next year. However, they need to be very cautious, opting to deliver in-demand family housing into those areas with resilient housing markets. Elsewhere, a greater number of forced sales could undermine this strategy,’ said Jon Neale, head of development research at Knight Frank.

The property consultants have noticed a growing interest from residential developers and housebuilders for well located locations. This is in complete contrast to the last quarter of 2008 where there seemed to be little appetite for any form of speculative land acquisition.

But the report suggests that, given the current constraints in the market, it will be difficult for the required delivery levels to be achieved unless new models are found for regeneration schemes or more Greenfield land is released for development.

The National Institute of Economic and Social Research warned that it is a lack of available homes that is driving up recent prices increases in parts of the UK.

As a result, the think tank expects the house price slump to persist for another two years.

‘The temporary rise in prices is probably the result of limited supply. There has been talk of stabilisation and some recovery in the housing market, but we don’t think this is the case. We only see growth in the housing market returning in 2012,’ it said.

Source: http://www.propertywire.com/