House prices to soar 17 per cent

By the end of last year, property values had dropped by 22.5 per cent – but just five months into 2009, and the market has rallied so strongly that a top property investment firm has switch-ed its position on prices.

Instead of predicting a further five per cent fall, economists at Assetz now say “significant positive growth is likely”. They say prices have already risen by nearly £2,000 in a month.

Figures compiled by Assetz from five UK property indices show the typical cost of a three-bedroom semi last month was £185,276 – an increase of £1,978 compared with the previous month’s average of £183,298.

So far this year, property values have dropped by just 0.7 per cent, helped by a 1.1 per cent rise in May. The annual rate of growth in prices forecast by the company for 2009 is 17.3 per cent.

Stuart Law, chief executive of Assetz, said: “All indicators now suggest that we have passed the bottom of the house price curve. All the major indices, analysed in our own report, and the recent RICS [Royal Institute of Chartered Surveyors] survey are indicating an end to falling prices and an increase in activity.

“Extreme supply limitations and some interesting new first-time buyer mortgage products will help support market recovery and it is likely that we will see a flurry of higher loan-to-value rates released, as soon as it is widely recognised that the market has stabilised and the risk to the banking sector of further housing equity losses has diminished.”

James Hyman, partner for residential sales at property firm Cluttons, said: “The market has shown a remarkable turnaround in the last few months.

“A healthy number of buyers have returned to the market, including frustrated savers and frugal first-time buyers who have accumulated a healthy deposit. This, combined with a shortage of stock for sale, has resulted in fierce competition for quality properties and quicker sales, supporting price recovery.”

Housing intelligence group Hometrack said there had been a 36 per cent rise in buyers registering with agents in England and Wales in the past six months, but only a 6.4 per cent increase in properties on the market.

It said this mis-match between supply and demand was supporting an upturn in house prices. Estate agents have also reported rising sales in recent weeks.

Lee Bramzell, of PropertyIndex.com said: “The Assetz house price figures are very encouraging, pointing to the start of an upward price trend that homeowners have been waiting for.

“News that we could be over the worst should fuel market activity, attracting sellers as well as buyers into the market as competition begins to pick up.”