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House price inflation hits 8.5% despite slowing market

Written by on 1 June, 2010

April’s House Price Index data from the Land Registry shows an annual price increase of 8.5%, despite the slowing property market. April therefore marks the sixth consecutive month in which figures for house prices have been positive, a slow but sure recovery after the long slump of the recession.

The increase means the average property value in England and Wales has now reached £165,596, after a small rise of 0.2% from March to April. This continues a very slow start to the property year, as average property prices were not much less at £165,034 in January. House prices have begun to stabilise into sustainable figures in their slow climb after a rapid change in the past twelve months.

Average house prices are higher than the previous year in every region of England and Wales, though there is a significant difference between sought-after areas and elsewhere. The highest annual price change was in London where a gain of almost 15% was seen, while in Yorkshire and The Humber there was a minimal increase of only 0.7%.

The highest monthly change was in the North East where prices increased by an impressive 3.1%, an annual change of 4.4% leaving the average house price at £114,767. Unsurprisingly after a very bleak increase year on year, Yorkshire and The Humber had a negative monthly change of -2.2%, the most significant monthly price fall of all. The figures show that the average house value in London is a high £341,487 compared to the substantially lower prices in the North East and Wales.

Property sales have gradually been increasing, with figures from February of this year showing a 49% rise from February 2009 to a total of 40,502 transactions; a notable increase after the recession-led dip. However, despite the increase in sales they are still less than half of that seen in September 2007, when prices were last growing at such a fast rate.

The report from the Land Registry shows that since April of last year, detached property prices have increased by a huge 9.5% to an average of £258,892, while flats have risen to £157,784 as an average, a steep 11.6% increase from April 2009. Terraced properties had the smallest annual price increase, gaining only 6.2% from £118,053 to £125,428.

Though a lot of leeway has been made, the housing market is predicted to cool off over the coming months. It was already reported last month that house prices are beginning to stabilise, with more properties coming onto the market and buyers waiting for the outcome of the election before taking action. The number of new buyers halved in May, reports from property intelligence group Hometrack have shown. While the number of people placing their homes on the market rose by 1.8%, this was down from 3.7% in April. This lack of supply has meant that agents have been able to make sales with a quick turnaround, as well as increasing asking prices.

More homes could also come onto the market, the report stated, if the Government announces plans to increase the rate at which Capital Gains Tax is charged from the beginning of the new tax year. Property investors may try to take advantage of the current 18% rate. It remains to be seen what effect the new Government’s budget will have on the housing market.

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