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Today the Bank of England's Monetary Policy Committee voted to keep borrowing costs steady at 5%. It is reported that most economists are thinking the Bank is in a wait-and-see mode with the pound to the dollar running at a 14 year high. Economists polled by Reuters earlier this week were undecided about any movement in rates into 2007. Thirty four of the 50 polled said rates would stay the same at least until March, and 16 predicted an increase.
Confidence amongst househunters remains high in the run up to Christmas as homes buyers and sellers expect house prices to rise by 5.40% over the next 12 months.
It's a sellers market The housing market is currently a sellers’ market as demand far outweighs supply. While they hold the upper hand, sellers are less likely to compromise on the asking price. Currently sellers are only willing to offer, on average, a discount of 3.53% on the asking price (compared to 5.75% back in December 2005).
87% of home buyers and sellers believe property prices will continue to increase according to the latest figures. Over the next 12 months they expect prices to rise by an average of 5.40%. This is up significantly from last December when the housing market was recovering from a slow 2005 and only 57% of respondents thought that house prices would rise by an average of just 1.24%. Warren Bright, chief executive of propertyfinder.com said:
“2006 was a strong year for the housing market with house prices rising close to 9%. Confidence was high throughout the year with buyers and sellers on average expected house prices to rise by 4.45% and 4.32% respectively.
“Last year, home buyers were unprepared for the strength of house prices to come. Entering 2007, overall confidence in the housing market will be strong, although outside London and the South East optimism is more subdued. We expect house prices to continue to rise on average 5.40% by year end.”
The outlook for the property market for the coming year is much harder to call this year than last.
Our expectations of a strong 2006 came true in spades, although commodity prices pushed interest rates higher than we expected. These higher rates are now clouding the waters for 2007. Confidence in the housing market overall is strong, although outside London and the South East, beyond the reach of City cash, optimism is more subdued.
The latest Bank of England lending data predates the November rise in rates, but shows robust volumes of housing transactions and no slowdown in the growth of mortgage lending. We believe some moderation of this growth is now likely as higher borrowing costs tend to have a lagged effect on the market. The likelihood of a further rise in base rates in February looks finely balanced. If it does happen, the housing market will cool more rapidly. If rates are left unchanged, we expect price growth in 2007 to slow gently, with prices up on average 5.5% by year end.
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The Valuation Office Agency, part of the Department of HM Revenue & Customs, allocates a council tax band to every home in England and Wales, and will be able to use the data to find out improvements such as double-glazing and conservatories that may increase tax bills.
It is feared this will lead to tax bills rising up to 400 per cent. Homeowners who have used the website were apparently unaware that their details had been sent to the Government without their knowledge, raising serious data protection issues.
Read the full story here.
