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Surprise price rise in January - 9 February 2009
Despite the worsening economic news coming from banks, industry and the City, Halifax has reported a shock rise of 1.9 per cent in UK property prices in the first month of 2009.
The rise in prices in January recorded by the largest mortgage lender in the UK marketplace has come as a significant surprise given the lack of any good news to lift the spirits of investors and sellers alike.
The rise in prices seems to be down to a combination of two market elements looking to restart their property buying habits.
Firstly, the National Association of Estate Agents (NAEA) has reported that the proportion of first-time buyers (FTBs) in the market has more than doubled in the first two weeks of 2009 compared with the figures for December 2008. The NAEA says that first-time buyers made up 22.5 per cent of the property market in the first two weeks of January, compared to just ten per cent a month before.
This news is particularly encouraging for the market as FTBs are commonly seen as the most important part of a healthy housing market. If confidence is growing in this sector of the market and agents and developers can bring this new money into the housing system, it should start to free up credit and the process of transactions in the rest of the market.
While the rise in FTB interest is good news, it could also be a reflection of the continued reluctance of banks to lend to buyers in all parts of the market. In short, it could be argued that the FTBs now looking seriously to buy would have got on the housing ladder much sooner had they not been forced by lenders to gather such significant deposit sums.
There is also an argument that the deals being offered to FTBs in the current climate is prompting many to take the plunge now, perhaps as they believe the bottom of the market is not far away. Once prices begin to rise and demand for FTB properties increases, the great deals offered by developers will begin to disappear.
The other part of the market that seems to be restarting their buying habits is the investors who do not necessarily need to mortgage in order to buy. Cash buyers are beginning to feel that the bottom of the market is near, and are making the most of it by getting the properties they want at a price significantly reduced from a year ago.
While it is far too early to be hailing the resurrection of the property market as a whole, it is encouraging to see that some buyers are being tempted back into the fray. It will take some significant time to overcome the inertia and inactivity that has been the defining characteristic of the past year, but once the wheels of buying and selling begin to turn again, it should be possible to build up some momentum.
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