Archive for the 'Main' Category

Nationwide’s results for May have shown that house prices rose by just 0.2%, slightly up from 0.1% in April. May’s results brought the annual rate of house price inflation to 4.7%, down from 4.8% in April.

Nationwide’s group economist, Fionnuala Earley, commented “The price of a typical house in the UK is now £164,632, almost £7,500 more than at this time last year. This is equivalent to a price increase of just over £20 per day over the last twelve months.”

The report goes on to comment that the supply of houses on the market has increased over the past few months, while the supply of buyers has declined. As supply exceeds demand, it becomes a buyer’s market, with buyers able to push down asking prices.

Interest rates have also begun to rise on mortgages, as lenders expect a rise in the base rate in the coming months.

Nationwide Building society have released results of their latest survey on what adds value to property. As always, location is the biggest factor – with a good location potentially adding over a third in value.

Adding bedrooms and bathrooms both add around 5% to 6% each, good parking can add 6%, and central heating can add nearly 7%. A good loft conversion however, can add over 20% to a property’s value.

The survey also looked at the cost per square foot in different properties. It found that while larger properties may cost more, the price per square foot of the smallest properties can be nearly double that of larger properties. Small 1 bed flats can cost up to £286 per square foot, while a large 4 bed house can be as low as £149 per square foot.

In terms of comparing new builds to second hand homes, the premium for a new build has dropped markedly over the last ten years. 10 years ago a new build could command a price roughly 25% higher than a similar second hand house – this has reduced to just 6% in today’s market.

Profits for DIY store Homebase have more than halved, going from £114m to £52m. Profits at B&Q have also dropped, with it reporting a 9% drop in profits for the first quarter compared to last year.

So what is happening to the UK DIY market? Has everyone lost interest in improving their homes? Maybe now that the huge price increases at the start of the decade have smoothed out, fewer people are interested in improving their homes? If there isn’t a rising market to help you add value, it seems people are less interested in DIY.

Perhaps the rises of the last few years were compounded by people adding value to their houses. This may also agree with the dropping in house price increases occuring at the same time as a drop off in DIY spending.

The Council for Mortgage Lending (CML) has released results for April ’06, saying that total lending for the month was £25.1 billion. This figure was 12% lower than March’s £28.4 billion, but this is likely to be due to the timing of Easter – in terms of average lending per working day, April’s figures were higher than March’s.

Michael Coogan, CML Director General, said:

“The record figures we have witnessed over the past six months illustrate that the market is in robust shape. Even so, the level of new mortgage approvals has stabilised in recent months, and we do not expect the underlying level of lending to rise from recent levels.

“In the past couple of months the interest rate picture has changed and financial markets are expecting the Bank of England to raise rates this summer. If this happens, housing and mortgage market activity is likely to slow down from the recent high levels as the year progresses.”

The minutes of the BoE’s rate meeting have been released today; showing that this months decision to keep rates at 4.5% was made up of 6 votes of no change, one to raise by 0.25% and one to lower by 0.25%.

The majority of the members of the Committee felt that the factors of the current economy that might suggest a rise may be necessary were broadly counter-balanced by those that suggested a drop was necessary.

This is the first time since May 2005 that any members have voted for an increase in the repo rate. Also, Stephen Nickell, who has been voting for a drop in rates for several months, has now ended his membership of the Monetary Policy Committee (MPC).

This three-way result of voting has lead people to believe rates will remain at 4.5% throughout 2006. Howard Archer, chief European economist at Global Insight, said the voting spread meant it was now likely “interest rates will remain unchanged through 2006”. He added, “The overall tone of the minutes are still relatively balanced, and there is clearly considerable uncertainty within the MPC over the growth and inflation outlook.”