What caused June bounce in market?

The housing market defied the predictions of the ‘doom and gloom’ brigade in June, according to the latest analysis from Halifax, which records a rise in the average house price of more than £2,000.

The lender says house prices eventually averaged £163,049 in June 2011, against £161,039 in May and £160,393 in April.

June’s average purchase price was the highest since January 2011.

Halifax housing economist Martin Ellis says: “Low interest rates, an increase in the number of people in work, and some tightening in market conditions earlier in the year are likely to have been the main factors behind the recent improvement in price trends.

“Low earnings growth, higher taxes and relatively high inflation are all putting pressure on household finances.”

Nationwide BS, which produces the other big monthly analysis from lenders, also takes a cautious line, though it, too, thinks average prices rose in June.

Nationwide puts the rise in the average house price at just under £1,000, to reach £168,205.

It thinks the market “moved sideways” in the past six months, with a weak level of mortgage applications and a sluggish pace of “new buyer enquiries reported by surveyors.”

Capital Economics, the consultancy which has led the way with gloomy, bearish forecasts for private sector housing since 2007, claims the stock of unsold homes on the market rose to a 28-month high of 71 properties per surveyor in May.

“Although, taken together, the main indices suggest that house prices look broadly unchanged on the month, further falls look likely,” Capital Economics predicts.

The consultancy points out that the current ratio of house prices to earnings, at 5.2, is “significantly above” its long-run average.

“Any comparison between house prices and rents, or house prices and equity prices, points to a similar degree of over-valuation,” it says.

However, a survey from estate agency LSL Property Services, which includes agency brands Your Move and Reeds Rains, took a different line to the big lenders, with director David Newnes saying a price fall in June of 0.8% should be seen as relatively large.

“Where annual prices have fallen in the last year, the drop in property values seems to be stimulating transactions,” says Newnes.

“In Yorkshire and Humber, which have seen transactions grow faster than anywhere else in the country, prices have fallen by 2.7% over the last year.

“In London, where the price increase of 5% since June 2010 was greater than in any other region, year on year, transactions are growing more slowly than anywhere else in the country.

“The annual price falls outside London and the South East are beginning to increase demand as affordability of properties improves, which will begin to put a brake on falls in prices nationally,” he believes.