Despite nay sayers claiming the recent housing recovery is nothing but a mirage caused by lack of the right stock, more reports are coming out with good news.

The House Prices and Affordability Index from FindaProperty.com shows national UK asking prices moving into positive annual growth for the first time this year, with prices currently £512 higher than a year ago.

And, what’s more, they say with confidence, this is a result of six consecutive months of stable, or positive monthly house price growth, as buyers take advantage of good value in the market with renewed confidence.

Report headlines focus on the fact national asking prices are higher than they were a year ago (£218,134 compared to £217,622 a year ago); there has been six consecutive months of stable, or rising prices, which suggest a consistent and solid recovery in the UK housing market; and, houses and larger properties are supporting this recovery, while flats and entry level properties are still showing annual price falls, creating opportunities for first time buyers.

The report highlights the fact that the recovery is being spearheaded by estate agents listing houses and properties at the upper end of the market, while flats and first time buyer homes continue to record annual falls.

Also, it shows that those properties with three, four, or five bedrooms and suitable for existing homeowners moving up the ladder, are 6.61% higher than a year ago, while entry level properties (studios, one and two-bedroom homes) are 4.6% lower. The reason for this is believed to be that that many existing homeowners still have substantial equity in their properties, so are able to access the mortgage market fairly easily despite tighter lending criteria.

The report also concluded that first time buyers have also been hardest hit by the poor employment market, reducing demand for entry level homes and therefore impacting values.

Interestingly, the average value of houses on the site is currently £239,379, 1.1% higher than a year ago, while flats are 2.17% lower than a year ago at £174,318.

And falling prices at the lower end of the market have opened up an opportunity for first time buyers. They face an ‘Affordability Gap’ which is £11,148 smaller than at the start of the year. This Affordability Gap refers to the cash deposit needed to a buy a typical first time buyer home after obtaining a mortgage achievable with average first time buyer household income

And the gap has plummeted since January, but now appears to be bottoming out as UK house prices stabilise, suggesting now is the time for first time buyers to enter the market. Furthermore, they currently need to save 1.74 times their gross annual household income, compared to 2.18 times at the start of the year.

Michael O’Flynn, Director of FindaProperty.com, said:
“Movement into positive annual growth in property prices is the news homeowners have been waiting for and suggests the UK housing market is making a sustained recovery. There is no doubt that lending criteria remain an issue, but most existing homeowners are still able to access the mortgage market using the equity they have built up over the years.

“This may be the ideal time for first time buyers to enter the property market, as the affordability gap has declined drastically since the start of 2009 and now appears to be bottoming out. But while first time buyer affordability is clearly improving, they remain constrained by the income multiples offered by lenders and still need to raise very substantial deposits amounting to more than a third of the value of the property they wish to buy. The majority of those who are able to seize this buying opportunity will still be relying on the Bank of Mum and Dad to raise the money they need.”

Guest Article by Neil Camp

The latest annual Halifax Housing Review has revealed that house prices in rural areas have fallen by less than in urban areas over the past year.

The average rural house price drop has been 13%, whereas it’s 18% in urban areas. And the average rural house price of £203,5351 is now 21% higher than the average urban house price of £168,376 compared to 15% higher a year ago.

And, ironically, the falls, albeit less than in urban areas, has meant that the affordability of rural housing has improved over the last year.

The Halifax Housing Review Rural house prices in 2009 are, on average, just over six times average gross annual earnings – the lowest ratio since 2002. However, housing in rural areas still remains markedly less affordable than in urban areas. The average property price in rural areas is 6.3 times average annual earnings compared to a ratio of 5.2 in urban areas.

What’s more, some 27% of all home buyers with a mortgage in rural areas are first-time buyers, which is the highest proportion since 2000. Nonetheless, there are still far fewer first-time buyers in rural areas with first-time buyers accounting for 44% of all buyers in urban local authorities.

And the limited amount of social housing still remains a problem, with just 13% of the rural housing stock in England was social housing in 2008, compared with 19% in urban areas.

Suren Thiru, economist at Halifax, said:
“Homes in rural areas continue to command a marked premium over urban locations, partly reflecting the quality of life benefits that many people associate with living in the countryside. Higher prices, together with generally lower earnings, mean that housing in rural areas remains significantly less affordable than in urban areas. The difficulties this presents for households living in the countryside are further aggravated by the relatively low levels of social housing in rural areas.”

So, rural properties remain attractive, but only to those that can afford them, or indeed, can afford to live in areas where jobs are not close at hand. And with social housing still remaining a seemingly low priority in rural areas, and unemployment increasing throughout the UK, the situation is unlikely to change over the coming years.

Guest Article by Neil Camp

House prices are beginning to show tentative signs of recovery, not only in some of the recent building society reports showing small overall increases, but also according to the City of London investment markets.

The City boys are trading in residential property derivatives and these look forward to the future state of the housing market and the way these are currently being priced suggests that any further declines in the property market will be far less than originally forecast.

At the start of 2009, the signals coming from the City derivatives market was that house prices could fall a further 30% between 2009 and 2011. As the first half of the year comes to a close, the same market is predicting further drops of less than half of that expected, some 12%.

And say the experts, this sudden reversal of fortunes has been taking place in only the last few weeks, signalling a quite dramatic change in sentiment over the short to medium term future of the U.K. housing market.

It is believed that the improving signs in the City have come about because speculators have entered the derivatives market and bought property exposure at deeply discounted levels.

This trend seems to be borne out by May’s Nationwide House Price Index which went up a touch at 1.2%, although the building society was quick to point out that this did not mean that the market had bottomed out.

But also confirming the recovery trend has been anecdotal evidence from estate agents which point to a large increase in cash buyers, especially those at the top end of the market, where one agent reported that over 40% deals were done for bundles of notes.

This cash – from various sources including top-of-the-market house sales and the closure of stock market portfolios – is having to find a home somewhere and property seems a good bet.

Property experts were keeping their fingers crossed that the upward trend was set to continue over the coming months.

Guest Article by Neil Camp