This morning saw this months ‘Halifax House Price’ index post a second successive increase, with UK house prices gaining 0.8% in August. The data depicts a stabilised housing market with August becoming the fourth positive month in 2009, the average UK house price is now in-line with valuations last seen at the end of last year.
However at £160,973 the average UK house is still 10% lower in comparison to August 2008, which was before the recession took its sharpest decline last autumn.
In an accompanying statement Halifax housing economist, Martin Ellis commented on the recovery in housing demand stating;
“Demand for housing has increased since the start of the year due to better affordability and low interest rates. This, together with low levels of property available for sale, has boosted house prices over the last few months.”
The report may provide some positives to retailers and UK focused construction and homebuilding sectors. From the retail perspective mortgage payments continue to reduce as the record low base-rate slowly filters through to those fortunate households with tracking-rates on their mortgage, which may gradually relieve pressure on consumer spending. According to the Halifax report the proportion of disposable earnings devoted to mortgage payments has fallen significantly over the past 21 months.
Similarly the typical mortgage payments for a new borrower have fallen to 29% from a peak of 48% of average disposable earnings in 2007. Recent data from the Bank of England indicate increase activity in the housing market, with industry-wide mortgage approval in July rose for the sixth successive month.
The trend in the UK housing market may potentially be sustained as key lending should continue with the Bank of England Voting in favour of maintaining its ‘quantitative easing’ stimulus and also interest rates at 0.5% remain unchanged following this mornings meeting.
In a volatile early session in London the affected equities have had a mixed day, the FTSE 250 Construction & Materials Index rose over 1%, with Balfour Beatty Group (LSE:BBY) leading the way, rising as much as 4% earlier this morning, while fellow house builders Persimmon (LSE:PSN) and Bovis Homes (LSE:BVS) have turned negative despite making strong initial gains.
Elsewhere UK listed retailers have struggled this morning with FTSE 250 Retail index falling 2.5%, as interim statements among key retailer emphasised a challenging outlook for next quarter despite promising Q2 data.