Mortgage Guides

House prices: Past, present and future

Updated: Friday 6 May, 2011

By Hazel Cottrell hazel@consumerchoices.co.uk

Want to know what’s happening in the rollercoaster world of house prices? This guide explains the facts.

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Whether you are considering buying a house, or have recently stepped on the property ladder, it’s likely you’ll be keeping a close eye on house prices.

In this guide we look at what has happened to house prices since the credit crunch, where they are now and where they might be heading.

Past

Before the credit crunch of August 2007, there had been a sustained boom in the property market for almost 10 years. House prices were climbing at an impressive rate and it appeared that they would continue to do so.

In January 2008, house prices were at their highest, averaging £184,203, according to the Land Registry (www.landregistry.gov.uk).

Property looked like a safe investment and so banks were happy to lend. However, the increasing cost of property made it more expensive for first time buyers to get on the ladder.

Then the credit crunch hit. House prices fell dramatically and by April 2009, the average house was worth £152,761, having lost 17% of its value.

Present

Since April 2009, house prices have been creeping up tentatively. The latest Land Registry figure show that the average house price stood at £162,215 in February 2011 - a rise of 6.12% since April 2009 but still almost 12% down on the January 2008 peak.

So, houses are now cheaper than they were before the credit crunch, which is positive news for first-time buyers.

However, while house prices appear to have stabilised over the past few months, there is the risk they will fall further.

After almost two years of refusing mortgages to anyone with less than a 30% deposit, lenders started to slowly relax their lending criteria in 2010. By the beginning of May 2011, a number of lenders were offering mortgages that required deposits as low as 5%.

Future

In the short term, property is no longer a one-way bet: prices could rise or fall. So if you’re considering buying property as a get-rich-quick scheme, you’re 10 years too late.

However, if you’re seeking to buy property as somewhere to live rather than a speculative venture, now is as good a time as any to get your foot on the ladder.

This is because, rather like the stock market with its daily gyrations, historically and over the medium to long term (5-10 years), the housing market creeps up. For example, since it was launched in January 1995, the Land Registry’s House Price Index has increased by 160%.

According to Nationwide’s House Price index, had you bought a property for £100,000 in the first quarter of 1995, it would now be worth £317,866, an increase of 218%.

So if you’re buying property for the long haul, history is on your side.

Read our guide, can I afford a mortgage, for help deciding whether now is the right time for you to get on the property ladder.

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