Are we witnessing a housing recovery?

Housing market activity has picked up significantly this year with every month bringing a fresh batch of bullish data. Mortgage lending, house prices and transactions are all beginning to show signs of life, even outside the bright lights of London. This raises the question of whether this is the start of a meaningful recovery or a short-lived bounce similar to that seen in 2010?

Most indicators are now at or above the levels seen in 2010 during the early bounce back from the downturn. Average house prices are up 4.1% over the year according to the Nationwide index, while transaction levels are at their highest since October 2008. At 625,000 a year, annual mortgage approvals for house purchases are at their highest since July 2010.

Yet despite all the apparent record breaking, all three of these indicators are substantially below their longer-term pre-crunch averages. Behind the average statistics, the market remains fragmented with parts of the country still experiencing price falls.

Debt and equity

The post-credit crunch housing market has been characterised by low mortgage rates and homebuyers’ struggle to raise a deposit. Mortgages offering high loan-to-value ratios, popular in the noughties boom, are now scarce. Lenders’ demand for bigger deposits coupled with high house prices, means buyers are now required to save at least 70% of their income (120% in London).

Affordability and mortgage constraints have pushed many into the housing market’s overflow tank – the private rented sector. Although the private rented sector has been growing for the last decade, demand for rental homes has accelerated since 2009 and has been most acute in London where the economic recovery has been strongest.

In areas where house prices have fallen significantly, the scarcity of high loan-to-value mortgages have created a generation of mortgage prisoners who would be unable to buy or remortgage their existing home in the new lending environment.

But not everyone in the market has suffered. The substantial drop in base rates and hence mortgage repayments has allowed many existing homeowners to ride out the recession in relative comfort. Some have even taken advantage of low rates to pay off their debt. This has created a bigger split between equity rich homeowners, usually older generations, and those struggling to get a foot on the housing ladder.

Government intervention

The plight of first-time buyers has prompted the Government to launch a number of schemes over the years aimed at improving activity in the housing market. Most have focussed on the new build sector and have had a limited impact overall.

The latest scheme, Help to Buy, goes further than any of its predecessors and is aimed at all buyers, not just first timers.

But the main driver of the current improvement in activity this year has been the Bank of England’s Funding for Lending Scheme (FLS). The primary purpose of FLS is to provide banks with below market rate funding while they restore their capital positions. The side effect of increased lending has fed through to the housing market rather than business lending.

The biggest effect of FLS has been to drive down mortgage rates across all product types, including mortgages at higher loan-to-value ratios. While overall, mortgage rates are not as cheap as the market leading deals that are advertised, actual borrowers’ rates are down substantially.

Blowing a bubble?

Inevitably the prospect of rising house prices has led people to question whether we are seeing the beginning of another bubble. But behind the headlines, the increase in market activity has been due to increased turnover of existing debt rather than the creation of new debt.

Overall, the improvement in market activity is a welcome sign as increasing turnover will contribute to economic growth and hopefully rising incomes will allow housing market affordability to rebalance over the medium to long term.

However, looking ahead, although we are unlikely to see any increase before 2015, interest rates rises could dampen the housing market recovery. After four years of official rates at the current unprecedented low of 0.5%, higher borrowing costs will place a heavy burden on homeowners who stretched themselves when rates were low. The affordability squeeze may act as a brake on future house price growth.

Source: Savills

For House Price UK homepage click here

Follow me on Twitter @housepriceuk

Biggest house price risers and fallers in the UK

THERE is a distinctly Welsh feel to the top performers in the latest Land Registry house price report for England and Wales.
Welsh counties take the top three spots in the price rise table for the 12 months to the end of May - surprising given that Wales itself saw a 1.2% dip in prices over that period. 
Leading the way is Blaenau Gwent in South East Wales where prices are recovering from their low point in 2012.  
The former prosperous industrial area that has run into bleak economic times in recent decades saw prices rise 16.6% over the past 12 months - putting £11,500 on the average home. 
The average price remains one of the UK 's lowest at just over £80,000.
Rural Ceredigion and Gwynedd were the next best performers, up 7.3% and 6% respectively.
Prices now stand at £161,995 in Ceredigion and £140,855 in Gwynedd.
The next top movers were Greater London which saw prices rise 5% over 12 months bringing the average house price up to £375,068.
Reading was fifth in the list seeing a 4.9% rise with the average house in the Berkshire town now costing £200,821.

Biggest fallers

At the other end of the table the biggest drop in prices came in Middlesbrough in the North East. 
The town on the bank of the River Tees saw prices drop 10.2% in 12 months, a fall of around £8,000 on the average home. Prices now stand at £73,522.

The seaside resort of Blackpool was the next worst with a fall of 8.7% and prices down to £74,737.

The Isle of Anglesey in North Wales was next after seeing average prices go down 7.3% to £124,110.

The City of Nottingham saw a 6.4% decrease in prices to an average of £82,071 while North Lincolnshire was down 5.2% to £97,957.

Look out for breakdown on London and other metropolitan areas on the blog tomorrow.
For House Price UK homepage click here

Savills expect 18% increase in UK house prices by 2017

UK housing market activity has picked up significantly this year year say Savills  with every month bringing a fresh set of improved data. 

 There are now more positive indicators than at any point over the past few years, signalling a period of higher activity and price growth in a market that had been expected to show little or no growth this year and next, according to international real estate adviser Savills which today issued revised 5 year forecasts.

The firm now expects UK house prices to average 18.1 per cent growth by the end of 2017, compared to the 11.5 per cent anticipated when its forecasts were originally published in November 2012.  This means that house prices will broadly keep pace with inflation over this period rather than falling in real terms.

A combination of government intervention, improving consumer confidence and low interest rates have come together to make current improvements look more prolonged than the short-lived bounce seen in 2010.

UK mainstream five year house price forecast table 

The revised forecasts anticipate that average prices will rise by 3.5 per cent this year, against an original forecast of 0.5 per cent, with the pace of growth picking up over the period of Help to Buy.  This means that the UK average house price will surpass its 2007 peak in 2015 though there will be significant regional and local variation.

“A combination of low interest rates and stimulus measures means there is capacity for improved price growth over the next three years or so,” says Lucian Cook, director of Savills residential research.  “But it comes at the price of later price growth in 2016/17 when interest rates are expected to start rising.  Overall, this means that on an inflation-adjusted basis our revised forecasts indicate that prices will increase by just 2.3% over the next five years.

“Help to Buy goes further than any of its predecessors in being aimed at all buyers, not just first time buyers, but we believe its primary impact will be increased transaction levels and that higher than expected price growth is a secondary impact.  It needs to be considered against the context that the market remains only partially functioning.   While the combined package of Help to Buy measures could add 400,000 transactions over the next three years or so, they would still remain 24 per cent below pre crunch levels

“Its launch into an improving market has triggered concerns that the Government will provoke another bubble.  But, in our view, these are overstated given the conditions which attach to the scheme. Reassuringly, rising market activity has been due to increased turnover of existing debt rather than the creation of new debt that defined the late nineties/early noughties market. 

“This is much more about bringing forward growth from later in the cycle because of a number of factors, not least buyer sentiment.”

Strong growth in prime South West London housing market

The prime London residential market recorded the strongest price growth in the second quarter of 2013 for over a year, defying expectations that values would flatline this year and continuing a period of steady, if unspectacular, capital appreciation.

Across prime London prices rose 2.5% between April and June, bringing annual growth up to 6.6% from 5.5% at the end of the first quarter. But there are significant differences in performance between locations and price bands that reflect differences in buyer profiles, reasons for purchase and their perception of the market, with evidence that some market segments are now looking fully valued.

South West London leads

The strongest growth was seen in the predominantly domestic markets of prime South West London (running from Fulham to Richmond and Battersea to Wimbledon), where values rose 3.2% in the last quarter. Annual growth now stands at 8.5%, much higher than the 4.4% seen in prime central London. Despite reduced city bonuses, these markets are benefiting from wealth accumulated prior to the downturn, new wealth creation, especially from West End hedge funds, and increased buying activity from international buyers working and resident full time in the capital.

At the same time, domestic wealth has resisted a move out of the capital in this recovery cycle, resulting in a concentration of demand in prime South West London and similar markets such as Islington.

The best performing local market has been Fulham, which is increasingly seen as a hybrid between central London and South West London by showing some of the attributes of both markets at a price point between the two. This reflects the fact that it is undergoing a process of ultra-gentrification, attracting international and domestic buyers who, despite significant wealth, have been priced out of the central London market.

Prime central London values rose by just 1.6% in the quarter and 4.4% year-on-year on average. Here, price growth has become concentrated in the very core locations of Mayfair, Chelsea, Belgravia and Knightsbridge, which are the primary focus of new global wealth.

Other central London markets have remained more reliant on old world money and price growth has become more subdued. Locations such as Kensington, Holland Park, Notting Hill and St John’s Wood have been more sensitive to the effect of stamp duty changes for properties over £2 million than the core central locations. This has focused buyers’ minds on whether certain segments of the market are fully valued at this point in the cycle.

Properties worth over £10 million have outperformed the rest of the market since the beginning of 2005 with values 38% above their pre-crunch levels. For the moment at least, values appear to have plateaued, although transaction levels remain robust.

Indeed, in the first half of the year there were in excess of 85 transactions of properties above this price level, a 30% increase on the same period in 2012, leaving little new build stock in this price bracket available to buy.

Two-tier East of City

In the East of City, the divergence between the markets of Wapping and Canary Wharf continues, with the former seeing annual price growth of 5.8%, compared to 2.3% in the latter.

Whilst this means prices for prime residential property in Canary Wharf have recovered to their pre-crunch levels for the first time, prices in Wapping are some 20% above those levels, having performed much more in line with the prime London market as a whole.

UK house prices rise 2.9% in last 12 months

• Office of National Statistics House Price Report
• KEY POINTS:
• In the 12 months to May 2013 UK house prices increased by 2.9%, up from a 2.6% increase in the 12 months to April 2013.

• House price growth remains stable across most of the UK, although prices in London are increasing faster than the UK average.

• The year-on-year increase reflected growth of 3.1% in England, 0.8% in Scotland, 0.6% in Wales and 1.9% in Northern Ireland.

• May 2013 is the first month that Northern Ireland house prices have grown year-on-year since February 2008.

• Annual house price increases in England were driven by a 6.6% rise in London and a 2.7% increase in both the North West and the West Midlands.

• Excluding London and the South East, UK house prices increased by 1.9% in the 12 months to May 2013.

• On a seasonally adjusted basis, UK house prices increased by 0.3% between April and May 2013.

• In May 2013, prices paid by first-time buyers were 4.1% higher on average than in May 2012. For owner-occupiers (existing owners) prices increased by 2.5% for the same period. 

Average mix-adjusted house prices in May 2013 stood at £248,000 in England, £157,000 in Wales, £134,000 in Northern Ireland and £180,000 in Scotland.

In May 2013, London continues to be the English region with the highest average house price at £416,000. The North East had the lowest average house price at £144,000. London, the South East and the East of England all had prices higher than the UK average price of £239,000.

Excluding London and the South East, the average UK mix-adjusted house price was £189,000.

Rightmove doubles 2013 price forecast from 2% to 4%

At the beginning of the year Rightmove suggested a more positive outlook for 2013 and forecast average national asking prices would rise by around 2%. 

Given what we’ve seen over the first half of this year, we expect the average asking price of property coming to the market in England and Wales to end 2013 around 4% higher. 

While the current annual rate stands at 4.8%, in recent years the gains of the first-half of the year have been eaten away in the second. 

Between June and December last year, asking prices fell by 7%. The signs are that prices in 2013 will not dissipate as they have in recent years.

Shipside comments: “There will be significant underlying regional variations with some areas, primarily in the north, struggling to stay in positive territory for the year. London will continue to outperform the rest of the country and we also expect the South East, the main beneficiary of the ‘over-spill’ from the capital, to maintain its strong momentum, both driven by an on-going shortage of supply of property for sale. 

"Asking prices in the capital are currently 29% higher than they were five years ago compared with 7% in the South East and just 5% nationally."

• Average asking prices across England and Wales are now at their highest point since July 2008

Headlines from home.co.UK House Price Index
 • Average asking prices across England and Wales are now at their highest point since July 2008
 • A further 0.6% rise in the last month has pushed annual house price inflation to 4.0%, the highest annualised increase since March 2008
 • All areas of the UK recorded price rises in the last month, save for Yorkshire and Scotland • Overall, the number of properties entering the market is only slightly down (-4.4%) on last year
 • The volume of new properties entering the Greater London market was 22% lower last month (vs. June 2012), fuelling an increasingly fierce rate of home price inflation (now at 9.5%)

 Price trend Summary The mix adjusted average asking price for homes in England and Wales is now £241,710, a rise of 4.0% on July 2012. Following steady monthly growth in 2013, average house prices are now at their highest level since July 2008, providing a further boost in vendor confidence. 
The regional picture remains very diverse. London prices continue to soar at more than twice the rate of any other region. Price growth is now being recorded across most areas of the UK, although the Northern regions, Wales and Scotland continue to exhibit the poorest performance.
 The worst performer over the last 12 months is the North West which experienced a price fall of 0.2%. 
The volume of new properties entering the market last month was down 4.4% overall on June 2012, although it should be noted that stock trends do vary considerably across the country. At one end of the scale, new stock in the Midlands, Yorkshire and the North East has risen compared to last year and this will serve to suppress price growth. At the other extreme, annual price rises in Greater London are being driven by a 22% fall in new stock compared to last year.

House Price by region:
Scotland June-13 Average Asking Price £162,012 Monthly % change-0.5% Annual % change 1.0%
North East June-13 Average Asking Price £153,328 Monthly % change 0.3%Annual % change 0.7%
Yorks & The Humber June-13 Average Asking Price £169,421 Monthly % change-0.2% Annual % change 0.4%
North West June-13 Average Asking Price £173,109 Monthly % change 0.1% Annual % change -0.2%
West Midlands June-13 Average Asking Price £194,123 Monthly % change 0.3% Annual % change 3.0%
East Midlands June-13 Average Asking Price £179,569 Monthly % change 0.7% Annual % change 2.4%
East June-13 Average Asking Price £256,292 Monthly % change 0.3% Annual % change 2.6%
Wales June-13 Average Asking Price £175,977 Monthly % change 0.6%Annual % change 1.2%
Greater London June-13 Average Asking Price £386,767 Monthly % change 1.5% Annual % change 9.5%
South East June-13 Average Asking Price £310,031 Monthly % change 0.5% Annual % change 4.5%
South West June-13 Average Asking Price £263,986 Monthly % change 0.5% Annual % change 3.5%
England & Wales June-13 Average Asking Price £241,710 Monthly % change 0.6%Annual % change 4.0%
Source: Home.co.uk, July 2013

1 in 4 expect house prices to increase by at least 5% in the next 12 months

Confidence in the housing market has risen significantly over the past three months,according to the latest quarterly Halifax Housing Market Confidence tracker.

The tracker reveals that the headline House Price Outlook balance (i.e. the difference between the proportion of people across Britain that expect the average house price to rise rather than fall) stood at +40 in June. This was an increase of 7 percentage points compared with last quarter (+33) and was the highest score on this measure since the tracker began in April 2011.

The majority of people expect prices to rise across all regions. Confidence is strongest in London, which recorded a net balance of 69, followed by the South East. People living in the North West, the East Midlands and Wales were found to be the least confident about an upturn in prices.

In an indication that house sales could climb higher in the coming months, nearly one quarter (23%) of people think the coming year is a good time to both buy and sell a home, up from just 16% three months ago.

Martin Ellis, housing economist at Halifax, commented: “Sentiment regarding the outlook for house prices has improved markedly over the past quarter, continuing the trend seen since late 2012. This increase in optimism is partly due to house prices being stronger than expected in the first half of the year. We continue to see a clear north / south divide with significantly higher proportions of people expecting prices to rise in the south than elsewhere in the UK.

“Nonetheless, the market still faces substantial headwtoinds with, for example, house prices remaining above the historical average in relation to earnings. Such factors are likely to prevent a sharp acceleration in house prices."

Northern Ireland house prices at strongest level for almost 6 years

The price balance of the latest RICS and Ulster Bank Housing Market Survey for Northern Ireland was at its highest in almost six years in June.

It is only the second time since July 2007 that the price balance - which gives an indication of whether average house prices are rising or falling – has been in positive territory.

A net balance of 21% of respondents said that prices were up in the three months to the end of June (28% saying that prices were up in the period, 65% saying that they remained the same and 7% saying they were down).

The only other positive reading since July 2007 was in March 2013, when the price balance was 9.

Surveyors were also upbeat about transactions and transaction expectations in the June survey. A net balance of 44% said that transactions rose in the April, May, June period (56% said that they were up, 33% said that they remained the same, and 11% said they were down).

With regard to the outlook for prices, 89% of respondents said that they would remain the same in the three months ahead (July, August, September), with 11% saying they would be up - giving a net balance of 11.

The net balance for transactions expectations was 67. (67% said that they would be up in the three months ahead and 33% said they would remain the same).

Tom McClelland, RICS Northern Ireland housing spokesman, said : "We expect the summer months to provide an improvement, but, more significantly, what we are seeing is an overall trend of stabilisation in the market, which we expect to continue over the year as a whole. There will be bumps along the way, but we still expect 2013 to see an overall trend of easing price falls and increasing activity. The stabilisation in prices is encouraging greater activity, albeit we are still some way off what would be considered healthy transaction volumes."

Derek Wilson, Head of Lending Products at Ulster Bank, said: "There are a number of positive indicators in the market. Ulster Bank remains strongly committed to providing mortgage lending in all sectors of the market . We have provided more than £1.5billion of mortgage lending in the Northern Ireland market since the property price peak and continue to introduce initiatives that support demand and increase choice for borrowers."

Pylons and takeaways are biggest turn-offs for home buyers

• Electricity pylons were the least favourite among respondents to a survey with a staggering 70% unwilling to buy a property near an electricity pylon. Those that would consider living by one, expect to see an average reduction of 24% off the asking price of a property
• People expect a 25% discount on properties next to derelict land with rubbish, the highest of any of the blights
• An overwhelming 87% of Londoners would live next to a bus stop, with 53% expecting no discount on the price of the property
• Just under half of Londoners wouldn’t buy a property under a flight path. Those that would expect an average discount of 24%

A new survey by leading estate agent Greene & Co, which asked respondents whether they would buy a home next to one of nine noisy or unattractive locations, has shown that pylons, derelict land and the proximity of take away restaurants are the biggest turn offs for potential house buyers. 

Pylons were cited by 70% of respondents as being the least desirable blight to live close by, putting in second place derelict land (69%) and takeaway restaurants (57%) in third. However, buyers would live in close proximity to these blights if they received a discount of up to 25%. 

Bus stops were the least objectionable object with 87% of Londoners prepared to live by one while the UK sample followed by stating secondary schools (65%) and tube/trains (62%); these three locations also had the highest percentage of respondents happy to pay the full price for a property in London. Where buyers in London and the UK differed was their view of pubs, with (53%) of Londoners wishing not to buy next to a public house, compared to just 70% of the UK.

 The majority of Londoners would not buy a home next to derelict land (69%) or electricity pylons (70%) with a number demanding unrealistic discounts an average of 25% off the asking price.

 David Pollock, Managing Director at Greene & Co. comments: “Competition for property is rife across the country, especially in London, and this survey highlights that Londoners are being overwhelmingly more accepting of properties in noisy locations or next to perceived eyesores. However, it also shows that buyers expect to see varying degrees of discount off the asking price. Bus stops, schools and tubes or trains are mostly seen as selling points while electricity pylons and derelict land are definite no goes, with 70% of Londoners and those across the country declining to buy in these locations without substantial price rebates.

”Over half of Londoners (52%) would buy a property under a flight path, however, 35% would expect a 20-30% discount and a quarter (25%) would expect a discount of over 30%. The average property price in London now standing at £414,000*; and a the average 24% discount equates to  £103,500 off the asking price, which does bode well for homes potentially affected by  plans for a new runway at Heathrow.”

Welsh house prices fall £2,048 in a year

Fall in Welsh house prices continues: now £2,048 in a year year say LSL Property Services

 Prices now stand 1.3% lower than last year

 Average price almost back to the start of the year 

Oliver Blake, Managing Director of Reeds Rains estate agents, who has branches in Wales comments: “Unlike the rest of Britain, the Welsh housing market remains in slow reverse. Wales has seen the biggest annual average house price fall of any region: prices plummeted £2,048 in the past year. However, outside of Wales, only Londoners saw their houses rise significantly in value in  April. 

Sales in Wales are depressed compared to England, but London is the exception, not the rule, so the dramatic comparison is unclear.

“The torpor in the Welsh market is due to inadequate mortgage availability for first-time buyers. Encouragingly, more Welsh buyers are making enquiries – and plans for new estate agency businesses are also rumoured, so the interest is there. It’s the inaccessibility of mortgage finance for the average buyer that’s reining in demand. High rents and growing inflation are reducing the amount firsttime buyers can set aside to meet the large deposit requirements required by lenders. 

“This has lead to the fall: average prices rolled backwards by £219 in the last month. Despite the positive start to this year prices now stand a long distance away  – 10.8% lower  – from their record peak in 2007. Even by historic standards it’s poor.

 And the sinking prices are bucking the usual summer trend of sales rising as the summer season begins. House sales are low, especially at the bottom end of the market. And strict mortgage requirements and lenders’ caution have made it tough to boost sales activity substantially, which has also slowed down activity at the higher end of the market. 

In April house prices fell in 12 of the 22 unitary authorities. Within the country, there is a clear north/south 

divide. The 14 southernmost areas of Wales saw prices fall almost 19%, standing in stark contrast to the rise of 2.2% in prices in the six northernmost areas. Not only does this point to the population variations in different parts of the country, it also shows parts of Wales remain in post-industrial decline.

Table shows price April 2012/April 2013 followed by annual % price change

1 1 MONMOUTHSHIRE                          228,478 216,151 -5.4%

2 2 THE VALE OF GLAMORGAN                  226,295 207,962 -8.1%

4 3 CARDIFF                                184,848 186,243 0.8%

5 4 POWYS                                  171,414 183,545 7.1%

3 5 CEREDIGION                             186,259 177,289 -4.8%

6 6 PEMBROKESHIRE                          168,081 167,625 -0.3%

7 7 ISLE OF ANGLESEY                       160,447 164,984 2.8%

11 8 WREXHAM                                152,981 157,155 2.7%

10 9 GWYNEDD                                155,664 153,315 -1.5%

12 10 FLINTSHIRE                            150,020 152,084 1.4%

9 11 CONWY                                  156,480 150,348 -3.9%

13 12 NEWPORT                                146,412 149,756 2.3%

8 13 SWANSEA                                156,985 146,182 -6.9%

17 14 CARMARTHENSHIRE                        130,728 143,817 10.0%

14 15 DENBIGHSHIRE                           138,680 139,694 0.7%

15 16 BRIDGEND                               138,655 137,457 -0.9%

16 17 TORFAEN                                132,630 123,110 -7.2%

18 18 CAERPHILLY                             123,615 114,682 -7.2%

19 19 NEATH PORT TALBOT                      110,547 105,947 -4.2%

20 20 RHONDDA CYNON TAFF                     108,742 105,331 -3.1%

21 21 MERTHYR TYDFIL                         97,287 104,644 7.6%

22 22 BLAENAU GWENT                          82,444 85,598 3.8%

Energy saving measures could put 14% on UK house price

Making energy saving improvements to your property could increase its value by 14 per cent on average - and up to 38 per cent in some parts of England - new research released today by the Department of Energy and Climate Change (DECC) reveals.

For an average home in the country, improving its EPC (Energy Performance Certificate) from band G to E, or from band D to B, could mean adding more than £16,000 to the sale price of the property. In the North East, improved energy efficiency from band G to E could increase this value by over £25,000 and the average home in the North West could see £23,000 added to its value.

The report, which took into account over 300,000 property sales in England between 1995 and 2011, is the most comprehensive research in this area to date. It indicates that energy efficiency is now a key factor influencing the sale price of most residential dwellings in England.

Energy and Climate Change Minister Greg Barker said:

“We have long known the benefits of making energy saving improvements to the home, but this study is real evidence of the huge potential rewards. Not only can energy efficient improvements help protect you against rising energy prices, but they can also add real value to your property. This Coalition is committed to helping hardworking families with the cost of living. The Green Deal is designed to do exactly that.

“The Green Deal is helping more people make these types of home improvements, reducing high upfront costs and letting people pay for some the cost through the savings on their bills. The Green Deal is a great option for anyone wanting to improve the look, feel and potentially the value of their home.”

Kevin McCloud, broadcaster and co-founder of the Grand Designs Future Living home retrofit company, said:

“There are some 26 million homes in Britain, most of them about as well insulated as a rabbit hutch, and they need immediate help to be made less wasteful. This timely report tells us what we suspected all along: that people really value the well-insulated, energy-efficient home; that modest investment in measures to make our homes more comfortable, healthier and cheaper-to-run really pays off.

“The Green Deal is now maturing into a helpful way of financing a lot of the retrofit solutions around. Homeowners can now start to make these changes, alleviate the burden of high energy bills and improve the value of their prime asset.”

Nearly half (46 per cent) of properties in England are currently band D – but compared to this, a typical home in the West Midlands in band B is estimated to be valued at nearly £17,000 more. In the North East this could be over £19,000, £3,000 more than the national average.

James Brooks from Brooks Estate Agents said:

“For the majority of the UK we are seeing that there is a new factor dictating a home’s saleability. With fuel bills continuing to rise, buyers are becoming more and more conscious about the energy efficiency of their prospective new homes and are willing to invest more in a property now if they know it will cost them less to run in the future.

“As such, we always try to advise our customers to consider the real S.A.L.E. value – Size, Aesthetics, Location and Efficiency – when buying or selling.”

The Green Deal, the Coalition Government’s flagship energy efficiency initiative to transform the homes of Britain can help people capitalise on these findings. The Green Deal helps households pay for some of the cost of making energy-saving improvements, with the repayments spread out over time and paid back through the electricity bill.

Energy Rating and Dwelling Prices: Potential £ value increase

£ value increase from properties moving from EPC D to B & EPC G to E^*

	EPC D to B	EPC G to E
England average	£16,009	£16,701
North East	£19,265	£25,355
North West	£12,979	£23,155
Yorkshire & Humberside	£15,945	£17,298
East Midlands	£10,936	£10,177
West Midlands	£16,882	£9,282
East of England	n/a1	n/a1
South East	n/a1	n/a1
South West	£16,342	£8,026
London	£1,100	£41,808

Uk House prices rise to highest on record in May

Key points LSL HOUSE PRICE INDEX

House prices rise to highest on record in May

·         Beats previous peak in February 2008

·         House prices up £6,125 higher than May 2012; sales up 10,000 year-on-year

·         But it is London driving most of the increase – northern regions are still struggling

House Price	Index	Monthly Change %	Annual Change %
£233,061	237.3	0.4	2.7

BbcDavid Newnes, director of LSL Property Services plc, owner of Your Move and Reeds Rains estate agents, comments: “House prices rose in May to the highest on record. Even taking inflation into account, the record high price is symbolic of the significant improvement in the housing market over the past year. Prices are £6,125 higher than in May last year, sales are up 19%, and prices have only dropped one month out of the past eighteen. The catalyst for all this has been significant improvement in mortgage availability. Life for first time buyers is noticeably easier than it was six months ago. An abundance of great mortgage deals are on offer and lenders are more willing to lend to high LTV borrowers, which has led to a substantial rise in first-time buyer activity. Schemes like Help to Buy and Funding for Lending have acted like a steroid injection for the mortgage market and made it markedly stronger than last year.”

“But it is not quite as good as it looks. Take London out of the equation and the average price falls dramatically. The red hot London market is giving the whole property market a deceptively healthy glow. London still leads the way in terms of house price rises with growth in 31 out of 33 London boroughs annually and is the only region in England with average prices above previous record levels. The North/South divide is actually becoming more prominent as time goes on and as the London market is more exposed to a wider audience of potential foreign buyers, flocking to the capital. A strong economy is vital for the health of the property market and it is performing much better in London than other less resilient parts of the UK, which are suffering from public expenditure cuts. More needs to be achieved to help banks lend to new buyers, as a strong improvement in first-time buyer lending is the crucial catalyst for a full market recovery”.

“On top of that, the supply of mortgage finance is still constrained, despite improvements over the past year. Many buyers remain locked out of the market because they can’t afford to meet strict mortgage requirements and save enough for a deposit which is why cash buyers still account for a high proportion of the total number of sales. Lender’s caution will not disappear, as new regulations and controls continue to hamper their ability to lend. The only real solution is a sustained improvement in the wider economy which will help increase the supply of mortgage finance and improve demand for it.”

Owning home 13% cheaper than renting in UK

GAP BETWEEN COST OF RENTING AND BUYING NARROWS AS HOUSE PRICES RISE

•             Owning home 13% cheaper than renting on average across UK

•             But buying is now 3.2% more expensive than this time last year

•             Renting average 2-bed flat is £961 per year more expensive than owning

•             York is most cost effective to buy whilst Plymouth is best to rent

Although buying a property remains 13% more cost-effective than renting, the gap is narrowing as house prices are on the rise again, according to the latest research by property search website Zoopla.co.uk.

One year ago, renting in the UK was £993 per year on average more expensive than servicing a mortgage, but this gap has now come down by 3.2% to £961 today. As a result, the proportion of towns and cities across the UK where it is cheaper to buy than rent has fallen from 90% to 86% over the past twelve months.

The main cause of the narrowing gap has been that house prices have climbed at a faster pace over the past year than rents with the cost of renting a two-bedroom flat across Britain is now £84 (1.1%) more expensive on average than last year, whereas the cost of servicing an interest-only mortgage on a typical two-bedroom flat has risen £120 (1.7%) on average.

Despite the narrowing gap, it is still 13% cheaper to own than to rent. The average rental payment on a typical two-bedroom flat is £8,006 per year, compared to £7,045 per year to service an interest-only mortgage at a 5% rate. Using a 90% LTV interest-only mortgage at a typical Best Buy rate of 4.39%. , the rental premium is even higher with the average mortgage at £126,817 and interest of £464 per month, saving an owner £2,439 a year (not including cost of deposit).

Weaker house price growth in the north has meant that northern towns dominate the list of places where it is cheaper to buy than rent with York topping the list and where tenants pay a £3,326 (42%) annual premium over owners.

Higher property prices in the south have led to a number of places where it is cheaper to rent instead of buying with Plymouth topping the list and where tenants in the seaside town pay £845 (15%) per year less than owners on average. Despite the high rents in London, property price rises over the past year in the capital have now made renting 6% more cost-effective than buying.

Lawrence Hall of Zoopla.co.uk said: “Buying remains significantly more cost-effective than renting, but the gap is closing. With increased mortgage availability buyer demand is rising, especially amongst first time buyers, whilst rental demand is falling so house prices are generally rising faster than average rents, although it is clear that large regional differences still exist.”

TOP 5 LOCATIONS WHERE BUYING BEATS RENTING

Rank	Location	Avg. Monthly Rent*	Avg. Asking Price*	Rental Premium**
1	York	£940	£159,079	41.8%
2	Derby	£563	£95,774	41.1%
3	Coventry	£611	£105,578	38.9%
4	Hull	£503	£87,769	37.5%
5	Bradford	£507	£89,173	36.5%