House prices may have fallen by a fifth since October 2007 but the market is experiencing a mini-bubble, recovering since early this year with average prices up 4% since January, says the Halifax. Things are looking particularly good in London, it says.
But Gordon Brown's government housing advisor Kate Barker has warned that the market could be overheating, fuelled by a shortage of homes coming onto the market, which has meant that demand is outweighing supply.
‘I would be pretty surprised if we saw the strength of house prices sustained into next year,' she said. ‘I would see next year probably as a year where activity remains relatively low and possibly prices don't change very much.'
Apparently 2009 wasn't the property Armageddon everyone had been expecting. Lower than expected unemployment and record low interest rates of 0.5% kept mortgage costs down, which has in turn helped house prices to recover.
Said Barker: ‘With fewer people outright unemployed, probably more of them have been able to sustain their mortgages, combined with some quite helpful forbearance from lenders. That's been very good and it's one of the factors that's helped prevent what otherwise would have been a disconcertingly weak position.'
But next year will be crunch time as more people currently holding off moving house will feel they can't delay the move any longer. With more property on the market, the possibility of higher interest rates as the UK could see growth in the fourth quarter, the stalling of house prices could become inevitable.
News came today that youth unemployment has reached a record high of more than 950,000 as the jobless total nudged 2.5m, the worst total since the mid-1990s. The UK's unemployment rate has now reached a 13-year high of 7.9%, with more than one in five working-age people now economically inactive.
But there was a smidgen of good news - the unemployment figures showed the first fall in the number of people claiming jobseeker's allowance since February last year. And thinking of the bigger picture, Barker cautiously stated that ‘we do seem to be moving into a position where I'd be very surprised if we don't see some growth in the fourth quarter'.
Good news on the economy, even if it is muted, will be music to Gordon Brown's ears as the election machinery starts powering into action in early 2010. With rumours that the general election might be held at the end of March, any hope of the UK turning an economic corner will be welcomed with arms wide open.
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