Are House Prices Going To Go Up Soon?

In May this year, according to Nationwide, house prices have gone up by 1.2% and subsequently the annual house price fall has gone down from 15% to 11.3%. This is the second time in three months. Is the tide turning?

It’s still early days. The economic climate is still unstable with employment expected to continue to rise – some think another one million will lose their jobs before the end of the year. Although access to credit is beginning to ease, it’s easing slowly – in April mortgages approved edged up by 1000 and the gross lending increased from £3.4bn to £3.5bn.

Let’s take a look at supply. Stock levels are falling and new property onto the market is scant. Fewer new houses are being built and potential sellers do not want to put their property on the market if they are only going to get a low price. Many want to hold out for a year or so in the hope of achieving a better price – and a better price on a house sale is worth £1000s. And then there are also the sellers who have taken their property off the market, either to stay put or rent out until the market picks up. Supply is unlikely to pick up significantly in the months to come. Only those sellers who have to sell will sell at this time, so that’s the probate sales, repossessions (they tend to sell at auction more than through estate agents), marital splits and relocations.

On the demand side, house prices are low, interest rates are low and mortgages are becoming easier to get. There are increasingly more interested buyers out there – people who are in safe employment want to make the most of this opportunity and slowly those buyers will translate into sales. Or those that want to invest in property at a time when their savings are making a poor return. They will buy up the best of what’s on offer and as the supply continues to fall or remains flat, house prices in turn will rise.

Seasonally, this is the busiest time for estate agents. People buy in the Spring and slightly less so, in the Summer so house prices are expected to go up a little at this time. Come Autumn and leading up to Christmas estate agents become quiet again until the next Spring. By early 2010 the economy will be more stable and then property prices may then be on a slow increase (and interest rates may have started to rise by then – they won’t stay this low forever). As this gradually happens companies will begin to reemploy workers again – but it will be slow. As more people become employed, they will have more money to spend and so make more purchases, including purchases on houses.

If property prices follow what happened in the 1990′s downturn, property prices are likely to bump along the bottom of the trough with rises and falls for a few months yet.

If you find the right property and can buy now, then buy. Or if you can’t buy now, then save hard for a deposit, be in secure employment ready to get a mortgage, or if you are self-employed make sure you keep up to date with your paperwork – the mortgage company will want proof of your earnings. Speak to a mortgage broker or bank now and find out what you are going to need in order to secure a mortgage. And if you can, buy before early 2010. From early 2010 and as the Spring sales start to go through house prices may then be on a slow but sustained rise. Just before Christmas is usually a good time to buy – people want their property sale out of the way before the Christmas holiday.

However, opinions vary! Analysts expected house prices to fall in May and they rose. Some analysts believe that house prices will be on the up by the end of this year, others expect them to continue falling until mid-2010! It’s a guessing game and house prices are only one part of the wider UK economy and the global credit crunch.