Rise in house prices in February
Average house prices increased by 0.3% in February, taking the average UK property price to £196,930, according to the latest monthly index from Nationwide.
The building society noted that this pushes annual house price inflation up slightly to 4.8%, in line with the narrow range (between 3% and 5%) it has tracked since last summer.
The number of mortgages approved is also rising, according to the mutual. Robert Gardner, Nationwide’s chief economist, said: “The number of mortgages approved for house purchase increased sharply in January to almost 75,000, up from around 71,000 approvals in December and the highest number since January 2014.
“However, much of the increase is likely to be related to the impending increase in Stamp Duty on second homes which is due to take effect in April 2016. This is likely to have brought forward a significant number of purchases, which in turn will probably result in a fall back in approvals during the spring/summer.”
Mark Posniak, managing director at Dragonfly Property Finance, agreed that Stamp Duty deadline was impacting the market: “It’s hard to know if the April Stamp Duty deadline will be a speed bump for the market or a speed boost.
“Demand from buy-to-let investors will fall away during March but first time buyers could arrive in numbers. As the buy-to-let purge starts in earnest, the appallingly low home ownership rate for younger people may well pick up.”
Home ownership rates are now stabilising, at 63.6% in 2014/15, after declining gradually over the past 12 years. However, at 63.6%, this is well below the peak of 70.9% recorded in 2003.
Gardner explained: “If we look at the shift in tenure patterns by age over the past decade, we see a particularly marked decline in home ownership rates amongst the younger age groups, especially amongst 25-34 year olds, traditionally the segment containing most first time buyers (see chart below). While there was a marginal uptick in 2015, the proportion of younger adults who own their own home (currently 37%) remains considerably lower than ten years ago.”
Over the same period, the proportion of people renting (either privately or through a local authority or housing association) increased from 43% to 63%. For 16-24 year olds, the proportion renting increased from 73% to 92% over the same period.