David Prosser: House prices will not keep on going up
Outlook: The last thing we need is a return to the bubble conditions that inspired savers to become property entrepreneurs
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Your support makes all the difference.We start 2010 as we ended 2009, with another dose of better news from the housing market: the Bank of England says mortgage approvals rose once again in November, the most recent month for which it has data.
That the number of people seeking finance to buy property has increased from the low point seen in the summer of 2009 is one reason why house prices recovered so markedly during the second half of last year. And with restrictions on the availability of mortgage finance still easing – the Bank said the number of lenders requiring deposits of 25 per cent or more has fallen – we may continue to see these increases in approvals. However, that is not to say that last year's upwards momentum on prices is sustainable.
Those gains were achieved on very low transaction levels. Buyers may have been relatively thin on the ground last year, but sellers were even harder to find. As demand outstripped supply, the housing market bounced back.
This year is unlikely to see a repeat of the trick. Supply will increase as buyers who have been reluctant to sell up in a falling market are encouraged to take the plunge off the back of six months of rising prices. Demand, on the other hand, is likely to fall back, those increases in mortgage approvals notwithstanding. As the stamp duty holiday expires and unemployment continues to rise, the number of buyers will dwindle.
At best, that means a flat year for house prices, compared to last year's 6 per cent gain. And that is no bad thing – the last thing we need is a return to the sort of bubble conditions that inspired so many savers to become property entrepreneurs.
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