Confidence blows away clouds in housing market

Promises of a “barbecue summer” may have proved wide of the mark, but the property market has been hotting up — rising house prices, an increase in homes put up for sale and a jump in mortgage applications combining to paint a picture of growing confidence.

For the first time in more than two years, the closely watched monthly survey from the Royal Institution of Chartered Surveyors (RICS) said that more agents had reported a rise, rather than a fall in values, in August.

A net balance of 11 per cent of agents noted a rise, up from minus 6 per cent in July and the highest proportion since May 2007.

Expectations over the direction of prices in the next three months also improved, with 17 per cent of agents saying that they expected a rise rather than a fall, up from 7 per cent reported in July.

Meanwhile, the Council of Mortgage Lenders (CML) said that lending to homebuyers had shown “its first material annual growth in July since early 2007”.

The CML recorded a 24 per cent rise in the number of loans taken out to buy a home to 56,000 from June to July. The figure also represents a 19 per cent rise on the number recorded in July 2008.

First-time buyers accounted for a smaller proportion of these loans than home-movers, with 20,400 loans to new homeowners. However, the number of first-time buyers was also up, rising by 18 per cent on the month and by 22 per cent compared with last July.

The CML said that remortgage activity remained relatively weak, as steep falls in equity had made it harder for borrowers to meet lending criteria, and lenders’ standard variable rates have remained competitive.

Michael Coogan, director-general of the CML, said: “It is tempting to call the turn in the mortgage market at this point, and there is certainly concrete evidence that lending for house purchase is increasing — but there are still constraints affecting the lending industry’s capacity, as well as less consumer motivation to remortgage for the time being.”

Despite the encouraging signs of buying activity from the CML, RICS said that the recent demand from buyers and the number of sales were beginning to fall.

The balance of agents reporting an increase in sales fell from 45 in July to 34 last month, while buyer demand also dropped, with inquiries down from a high of 66 in June to 49 in August.

RICS said that the recent fillip in house prices, which has pushed values up higher than they were at the start of the year, has begun to encourage owners who had been delaying the sale of their homes to put them on the market.

A total of 12 per cent more surveyors reported an increase in new instructions in August.

Estate agents such as Savills have said that much of the recent rise in prices has been driven by equity-rich investors and those buying the best- quality housing., a search website, said that most of the price rises had been at the “top end” of the market and in London, while the price of properties aimed at first-time buyers, who have struggled to obtain mortgages, continued to fall.

The value of commercial property rose for the first time in 26 months, climbing 0.2 per cent in August, according to the Investment Property Databank UK monthly index. It said that continued easing in negative rental value growth and a second consecutive monthly improvement in yields, now at 7.86 per cent, were behind the first positive growth since June 2007. (Rebecca O’Connor, The Times)

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