UK Property Prices Stuck In A Rut

UK property prices seem firmly glued in the doldrums, according to the latest round of home and mortgage surveys.The latest, from researcher Hometrack, says increased demand but lack of supply is holding prices stable.Hometrack calculates the average home in England and Wales costs £155,600 down 8.7% year-on-year.

Similar reports from the Halifax, the UK’s biggest mortgage lender, Nationwide Building society and the government Land Registry all show marginal rises or falls on the previous month’s prices.The gloomy outlook is UK property investment is the breaks may have at last gone on to halt the property price slide but don’t expect any massive increases as lenders firmly keep their vaults shut to remortgages to raise funds for further investment.

“A lack of supply and rising demand have combined to prop up house prices in the last two months,” said Richard Donnell, Hometrack’s research director. “It is the demand side where the greatest risk lies as many would-be buyers continue to remain cautious or are unable to obtain sufficient equity or finance to access the market.”

In London, housing demand is outrunning supply by a factor of 10, Donnell said. The number of new buyers has risen by 36% in the past six months, outpacing a 6.4% in the number of properties for sale, Hometrack said. Overall, the increase in buyer registrations slumped to 4.6% in June, compared with 6 % in May.

Similarly, the number of agreed sales rose 6%, compared with 9.4% the previous month.Bank of England policy maker Kate Barker said the housing market is still “some way away from normal” and that banks have curbed mortgage lending to all but the safest borrowers.

She said would “be cautious about the scale of activity in the next year to 18 months.” The central bank said in a report last week that mortgage lending is now “focused almost entirely” on borrowers with clean credit histories.In a separate statement, the bank said banks are rejecting almost 1 in 5 mortgage applications every month and remortgaging is down almost 60% on the same period last year.

Mortgage approvals climbed less than economists predicted last month as the recession led to the smallest increase in net mortgage lending since records began in 1993. Banks granted 43,414 loans in May, compared with 43,191 in April, the Bank of England said.