Despite Recent Unrest in London, UK Home Prices Are Stabilizing

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Based on a new report from London-based real estate firm Chesterton Humberts, UK house prices rose for the third consecutive month in July, marking what is becoming an ever clearer picture of house price stability in England and Wales.

The typical house price edged up by 0.6% over the month to July, the highest monthly gain since the same month a year earlier. House prices typically rise in the summer months as the higher number of daylight hours permit a great number of viewings. However, this should not detract from noticeable increase in house price stability over recent months, a trend which is expected to continue over the second half of 2011.

CEBR expects that house prices are unlikely to fall much further. A chronic shortage of home building over the past four years combined with a low interest rate environment have sown the seeds for a modest recovery in house prices in 2012.

As growth slowly re-enters the United Kingdom economy, investors will see few safer bets than property in certain parts of the United Kingdom. Despite the recent market correction, average house prices have increased by around eight percent since the beginning of the recovery in March 2009, and nearly fifteen percent in London.

According to Robert Bartlett, CEO of Chesterton Humberts, "The unrest and destruction in parts of London is unlikely to cause overseas investors to think again about London as a safe haven although it may have a short term impact on London's property value resilience to date."

Key Findings

• House prices rose by 0.6% between June and July, the highest monthly growth rate in twelve months

• Despite the recent market correction, house prices in England and Wales have increased by 8.1% since the beginning of the housing market recovery, and by 14.7% in London

• This compares with earnings growth of less than 4.0% since March 2009 and around 3.0% annual interest rates currently being offered to savers

Bartlett further commented, "This month's Poll of Poll results show the steepest monthly increase since July last year, when house prices rose by 0.9% over the month.  Prices in London remain buoyant, with house prices in the capital now only 3.3% lower than their highest ever point, in February 2008, although it is clear that in prime Central London, prices are now considerably above their 2007 peak. 

While house prices do tend to rise during the summer, the fact that they are doing so in the current economic environment highlights the increasing price stability in the housing market and the confidence investors have in the future for the UK economy.

"Financial market turmoil has increased the numbers of private investors looking to diversify, with London property one of the prime beneficiaries of this capital flight. Globally, London and the UK is being seen as a safe haven for investment as it becomes clearer that the tough stance that the Government is taking on fiscal policy is helping to keep the UK out of the crises seen elsewhere in the world.  Key to maintaining this slow but gradual recovery will be a continuation of low interest rates and a gradual increase in mortgage lending."

Douglas McWilliams, Chief Executive of CEBR said, "With the recent volatility in currencies and global stock markets caused by the sovereign debt crisis, investors will undoubtedly be looking for new places to stash their wealth. A smart investor who bought at the lowest point of the UK housing market crash will now have seen a return almost triple that offered by most high interest savings accounts and even more if they have invested in London.

This month's Poll of Polls shows that the recent correction in house prices are now seemingly at an end and the market is becoming more stable. We forecast that this stability will persist through the remainder of 2011 with prices recovering modestly next year."

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