UK Home Prices Climb 5.9% in 2009: Nationwide
Home prices in the UK climbed 5.9% in 2009, according to a report from the Nationwide Building Society. The average price of a home in the UK landed at £162,103 ($257,105) to end the year with an 8.9% rebound from their lowest point in February 2009, according to Martin Gahbauer, Nationwide’s chief economist. Prices in the UK climbed another 0.4% in December, continuing a recent trend in steady month-on-month growth, but the growth seen in the rolling three-month trend dropped from 2.8% in November to 2.1% in December as prices increase more moderately than in the summer, Gahbauer said. “Few could have foreseen this development at the start of the year, when the near term price trend was still pointing to a repeat of the double digit annual decline experienced in 2008,” Gahbauer said. The UK has endured the worse recession since WWII as housing prices dropped 65% from its peak in January 2009 to November 2008. Demand rose at the start of 2009 as the government provided land stamp tax relief to borrowers and as interest rates hit record lows. “The re-entry of cash rich buyers into the market coincided with an extremely low supply of property available for sale, as low interest rates limited the number of distressed sales and a significant number of home movers decided to offer their properties for rent rather than sale. This restriction in supply meant that even a relatively modest pick-up in demand was able to put upward pressure on house prices,” Gahbauer said. Looking ahead to 2010, Gahbauer anticipates that the Bank of England will not raise interest rates until at least the second half of 2010. However, if the British pound continues to slip and inflation grows, interest-hikes could come sooner, according to Gahbauer. He’s also uncertain if the “cash-rich” buyers can support the housing demand. Despite signs of loosening credit lines, they remain tighter than before the downturn. “At this stage, therefore, it seems likely that 2010 will see no significant house price movements in either direction. However, the experience of 2009 demonstrates how unpredictable the market is at the current juncture and that one should always be prepared for the UK housing market to surprise,” Gahbauer said. Write to Jon Prior.