Since the start of the year, house prices have started to increase. Rightmove’s latest house price index shows a 3 per cent year-on-year rise for England and Wales.
One of the major reasons given for this is the current sentiment surrounding property values, not just in the industry but from homeowners.
Our recent Mortgage Mood survey reveals 70 per cent of UK homeowners believe the value of their house is fair.
Prices are still significantly lower than they were at their 2007 peak. So why does the average consumer feel their current valuation is accurate?
Prior to the 2008 financial crisis, house prices were inflated. The present belief that homes are valued fairly highlights a more realistic idea of what “normal” is.
People now feel they are getting value for money when they put their property on the market. This means more homeowners are willing to sell, increasing the availability of residential property and sparking the market rally we are seeing.
Rightmove’s latest figures support this, with sellers raising the average asking price by 2.1 per cent. Despite this increase, the gap between asking price and final sale price has actually reduced.
This has been bolstered by a rise in the number of buyers able to secure lending, thanks largely to the Funding for Lending scheme and Help to Buy initiative.
This is all great news for the housing market. It is widely predicted house prices will continue to rise once the Government initiatives and market optimism bed in.
However, the results also show concerns around house prices are no longer at the centre of the recent market stagnation. An increase in the availability of housing and appropriate mortgage finance is needed if a sustainable recovery is to take place.
Value is down to supply and demand and as the demand for property increases, it is paramount that the issue of housing stock is addressed. Lenders also need to maintain product innovation to ensure that prospective new buyers are able to achieve their goal of homeownership.
The Government has made headway in confronting these issues but more needs to be done if the housing market is to return to dynamic and stable growth.
Ben Thompson is managing director of Legal & General Mortgage Club