Housing & Mortgage round up: House prices rise as stamp duty is attacked


Housing & mortgage round up_istockphotoWe start this week with news that house prices are rising, whilst a report reveals that homes in the UK are overvalued.

We also look at a call to reform stamp duty after revelations that it will soon raise more money for the government that tobacco.

House price survey #1: Nationwide

In the first house price survey of the week, the Nationwide Building Society, reported “modest growth” of 0.4% during May; taking the value of the average home to £167,912.

The UK’s largest building society also revealed that house prices have risen by 1.1% over the past year, the largest annual figure since November 2011.

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Commenting on the figures, Robert Gardener, Chief Economist at the Nationwide, said: “House prices edged up by 0.4% in May, providing further support for the view that the housing market is gradually gaining momentum. The three month on three month measure of house prices, which is a smoother measure of the underlying trend, has been in positive territory since October last year. The annual rate of house price growth also ticked up to 1.1% in May – the fastest pace since November 2011.”

Gardener continued: “It’s not just prices – a number of measures of housing market activity have also started to move higher. In the first four months of 2013 the number of property transactions was running at around 5% above the monthly average prevailing in 2012. The number of mortgage approvals for house purchase in the first quarter of 2013 was also around 4% above last year’s monthly average.”

“A number of factors are likely to be contributing to the pick-up in activity. There has been an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures, such as the Funding for Lending Scheme. Indeed, mortgage rates have fallen back towards all-time lows in recent months.”

House price survey #2: Land Registry

A day after the Nationwide revealed their figures for May the Land Registry released their data for April.

According to the Land Registry, house prices rose in April by 0.4%. This is below the Halifax’s figure of 1.1%, but higher than the Nationwide who suggested house prices actually fell in April.

The Land Registry figures show a 0.7% increase over the past year, taking the average house price in England and Wales to £161,458, significantly lower than the figures given by both the Halifax and Nationwide.

The data from the Land Registry also show a welcome 28% drop in repossessions. According to experts this fall is due to a low interest rate environment, greater job security and greater forbearance by mortgage lenders.

House prices too high – OECD

A survey by the OECD (Organisation for Economic Cooperation & Development) has shown UK house prices are too high compared to both rents and income.

The research compared house prices to rents and wages in a range of countries and found prices in the UK are 31% too high compared to rents and 21% above incomes.

The UK has the 8th most overvalued property market, but things are not as bad as the likes of Canada, France, Norway and Belgium. Perhaps surprisingly, Japan and Germany have the most affordable housing markets.

It is clear though, that without intervention from the Bank of England and the government, in the form of the Funding for Lending Scheme and Help to Buy, amongst other schemes, the UK property market would be in a far worse state than it currently is and wouldn’t have staged a modest recovery from the slump seen after the financial crisis.

Stamp duty attacked

The rising cost of stamp duty has been attacked by the Homeowners Alliance.

In their Stamping on Aspiration study, the group shows that since the mid 1990’s stamp duty has risen by more than seven times the rate of inflation. The report also reveals that the average homebuyer now has faces a stamp duty bill of £5,957. In London this figure rises to a whopping £17,529.

Since the mid 1990’s, when there was one stamp duty band, set at 1% and payable on purchases above £60,000, there have been various new layers introduced, with a top rate now of 7% on purchases above £500,000.

Stamp duty accounts for £7 billion of revenue to the government. However, the Homeowners Alliance believe it is choking the housing market, saying: “Stamp duty is now so much per transaction that it has become a deterrent to moving home.(It) has gone from a tax that most homebuyers don’t pay to one that most have to pay.”

The Homeowners Alliance has called for stamp duty to be abolished for first time buyers and for thresholds to rise each year in line with house prices.

Paula Higgins, chief executive of the HomeOwners Alliance, said: “The overwhelming majority of people want to own their own home, and the government says it wants to help them. But the reality is that its ‘home tax’ is taxing their aspirations to death.”

Jump in mortgage lending

New figures from the Bank of England have shown a sharp jump in mortgage lending during April.

According to the Bank mortgage lending rose by £0.9 billion, with 53,710 mortgage approvals in April at a three month high. The number of people remortgaging their home also rose, to a six month high.

Mortgage experts believe the figures are a result of the government’s controversial efforts to help the housing market with the introduction of the Funding for Lending Scheme last summer, which has pushed down interest rates and Help to Buy launched in March.

Do you need mortgage advice?

Our mortgage adviser, Linda Wood, is here to help you. If you would like advice on your options or you are affected by any of the stories in this week’s housing round up please call  Linda today on 0115 933 8433, alternatively enquire online or email linda.wood@investmentsense.co.uk

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