28-06-2007
House prices still rising despite weather
The latest figures by Nationwide Building Society show that in June average house prices rose by 1.1%, the highest increase since December. This is in spite of the unseasonal weather conditions. The average price of a property in the UK is now £184,070.
This increase signifies bad news for home owners and property investors who will likely be facing another hike in interest rates very soon. It is expected the Monetary Policy Committee will increase the base rate by another quarter percent in the next few weeks, bringing it to 5.75%.
Such a move wasn’t expected until August and brings in to question how much higher rates will rise before the end of 2007.
Fionnuala Earley, Nationwide's chief economist, suggests that the housing market may be holding on because the effects of earlier interest rate hikes have yet to filter through to property prices. “If the full effect of earlier rate rises has yet to fully work through, the brakes are still being applied even before the rise expected in July”.
This means that the property market should slow down in the second half of the year as peoples incomes fail to meet their growing debt.
With Gordon Brown settling into his new role as Prime Minister and with a new agenda for property in the UK, Earley warns that any change to buy-to-let tax laws should not be rushed into.
“'Given the rapid growth in the buy-to-let sector in recent years, a dramatic change to the financials for landlords, particularly in a period of rising interest rates, could lead to some uncomfortable consequences,” she said.
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