According to the Royal Institute of Chartered Surveyors (RICS), more estate agents are reporting rising house prices than at any time since the credit crunch took hold. In fact, with 22% more agents reporting rises than falls, the proportion is at its most positive since May 2007 – the peak of the housing boom. This RICS statistic from the month of September has more than doubled from the previous month, up from 10% in August.
But just how much can we actually derive from these figures, seeing as the evidence shows that the demand is probably being driven by a shortage of property coming to market? Ian Perry, a spokesman for the institution, said: “A lack of supply is still underpinning the rise in house prices. Meanwhile, the level of inquiries from potential purchasers is increasing. This imbalance between demand and supply suggests that house prices will move higher in the near term.”
Most recent house price statistics, from other agencies, also show a clear north-south divide, with price surges in London and the South East with falls in the north. However, the RICS report is regarded as a good early-indicator of future market activity. After all, they were the first to spot the property crash of the early nineties. They also showed falling house prices in the summer of 2007, when other agencies didn’t pick up on them until later in the year.
Therefore, the RICS data will be closely monitored by analysts over the coming months for another downturn that has been predicted as part of the ‘w-shaped’ market theory.
The ‘w-shaped’ theory that a lot of market analysts subscribe to consists of the slump and then slight rise that we have just experienced followed by another fall and then a gradual climb to where we started off at the height of the last boom in 2007. The reason for the forthcoming predicted fall being a glut of properties coming onto the market, as interest rates start to go up and homeowners are forced to sell. This is a somewhat pessimistic theory, but one that seems to be more popular than the property bulls who think that the current trend will continue.
After prices being in freefall at the start of the year, the property bounce-back has come as a surprise to many. The Halifax index shows the current monthly rises keeping pace with the boom years and Nationwide has reported that prices are no longer falling annually. The revival began when the base rate of interest went down to an all-time low of 0.5% and cash-rich buyers, unaffected by the recession, realised that with the cost of borrowing being at an all-time low and house prices coming down by around 20%, the property market was a bargain.
However, as stated earlier, this recovery is far from universal and is being driven by popular areas and quality properties. With lenders who are still nervous, only buyers with deposits of 25% and upwards are able to take advantage of good borrowing terms. The market seems to be finely balanced at present. On one hand there is increased confidence from reports of price rises and a booming stock exchange. On the other we have the effects of the recession; unemployment, pay freezes and negative equity. Only time will tell what happens next.