House Prices Fall in February

House Prices Fall in February.

Nationwide has published its monthly UK house prices index for February and the results show that average house prices in the UK fell from £188,446 in January to £187,964 in February.

This is a fall of 0.1% and whilst the headlines will show house prices falling in the last month, the overall annual i.e. yearly house price inflation stands at 5.7% per annum.

Some commentators have suggested that the falls are due to a slight fall in consumer confidence however, we suggest that this is simply due to the lack of house viewings and house purchases over the festive period and early January.

Consumer confidence for property in the UK remains high with most commentators predicting 5% to 6% per annum growth over the next year and similar levels for the next two or three years.

We suggest that the property market will remain stable given extremely low interest rates at the present time and with potential for the Bank of England to possibly cut interest rates by a further 0.25% per annum to 0.25% per annum overall. In addition, most people are now used to the new mortgage rules with lenders being stricter in the information that they seek from a potential borrower to ensure suitability and affordability of any mortgage application.

As a final guide to future house prices, we have seen demographic projections published by the Office for National Statistics that suggest the overall population in London is set to expand by approximately 1 million people in the next five years and the population of the United Kingdom as a whole is set to expand by up to 10 million people in the next 10 to 15 years.

Given that the Conservative party has issued an election manifesto promise to build just 200,000 starter homes by the year 2020, Labour having pledged the same and the Liberal Democrats pledging 300,000 new homes if they are elected, supply simply will not keep up with demand and house prices will rise.

We believe the housing shortage in the United Kingdom is set to stay. We believe there is a conflict of interest for any elected government to suppress house prices given that any successful government after the next election will profit from property prices via the Help to Buy scheme and stamp duty land tax.

In the words of Mark Twain: "buy land they are not making any more".