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Caution urged on optimistic statistics - 11 November 2009

As the latest house price figures show a rise in property prices in the UK for the sixth month in row, and other surveys point to the highest levels of consumer confidence for 18 months, some in the UK property industry are urging caution and warning of the dangers of over-confidence.

The latest figures from Communities and Local Government in the House Price Index for September 2009 show that property prices in the UK rose by 1.2 per cent compared to the previous month, and that prices are now only 4.1 per cent lower than in September 2008. This is the sixth consecutive month that house prices have been shown to be rising, and the closest that the gap between year-on-year house prices has been for 13 months. Some watchers in the industry point to this being a result of rising demand and consumer confidence, an assertion borne out by a Times poll showing that the general public are more optimistic about the state of the economy than at any point in the past 18 months.

However, some property industry specialists are warning against over confidence and suggest that the price rise figures could be misleading. James Moss, director at Curzon Investment Property, a London-based investment specialist, said: “With house builders are barely building, we’re in a false economy. This means prices will be artificially inflated through a lack of supply. However, investors should always take any house price index with a large pinch of salt. A national average can never accurately represent the subtleties of any local market. Plus, it was this very obsession with house price increases – and people re-mortgaging their homes when they thought the values had shot up - that got us into this mess in the first place.”

Also worth noting in the latest House Price Index are the fact that new-build properties are showing a sharper decline in prices over the past 12 months than resale properties, being 6.6 per cent less expensive than in September 2008. This indicates that house builders are still discounting their new-build stock compared to previous levels, even with demand taking up any supply on the market.

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