News that the UK economy finally emerged from recession in the fourth quarter of 2009 has strengthened confidence in the property market, even though the emergence was very weak (i.e. 0.1%!).

Unfortunately though, house price increases are not being matched by average earnings increases, with many workers facing pay freezes or even cuts. This could ultimately at least slow the house price recovery or even bring it to a halt, if demand for houses drops.

Halifax said that firm economic fundamentals and a shortage of both new and used properties had led to the continuing house price growth. Also, official household projections have found that the shortfall in new homes is more acute than previously thought. Nevertheless, the Halifax expects that the three recent quarter point rises in the base rate will lead to slower house price growth in the coming months.

In terms of breaking price barriers, Northern Ireland broke the £200,000 barrier this quarter, with the average price rising to £206,495. Northern Ireland has had a remarkable two years of house price growth. Two years ago, only Scotland had a lower average and now only London, the south east, and the south west have higher averages. Prices have risen 76% in the two years – far higher than the UK average of 18%. The North-West has broken through the £150,000 average barrier, rising to £151,341. Now only Scotland, Yorkshire & Humber and the North have an average below £150,000.

The annual rate of house price growth was 10.9%, up from 9.9% in December 06. London had a slightly higher rate of growth, up from 11.8% in December to 13.2% in January. London was overshadowed by Northern Ireland however which has an annual house price inflation rate of 42.5%. Experts have suggested that this high growth is due to a peace dividend.

On a quarterly basis though, the rate of growth has dropped considerably. In the past three months, prices rose by 2.3%, compared to 4.7% in the previous three months.

Demand is dropping relative to the peaks seen in the autumn of 2006, but low supply is “continuing to exert upward pressure on house prices, particularly in London”.

Halifax also note that property tax as a percentage of total tax has risen from 10.4% in 1995 to 12.0% in 2004. This compares with a 5.3% average in the Euro-zone. What do readers think of this? Is it time for a change in Government? Add a comment to air your views.

1. Improving school results (79%)
2. Skips and scaffolding (70%)
3. Planning application notices (57%)

• more traffic wardens
• busier public transport
• more burglar alarms
• neighbourhood watch schemes
• graffiti removal
• ethnic food in local shops
• a growing telephone directory

ING estimates that if an area is displaying at least six of the factors, it should outperform the national average by over 13% for the next ten years.

ING Direct’s chief executive Lindsay Sinclair said “Traffic wardens and more crowded public transport are not things you would normally welcome, but it appears that such annoyances do come with a silver lining.”

Data from the Land Registry is from actual sale prices – unlike estate agent figures which come from market prices.

The most expensive place to live was Kensington & Chelsea, where a detached property would cost £5.6 million on average. In comparison, a detached house in Kingston Upon Hull would cost around £165k.

Prices have risen by 8.7% since this time last year, with prices remaining strong despite the recent rate rise, and further expected rises in the near future.

At the end of September, the average property price stood at £169,413.

Commenting on the figures Fionnuala Earley, Nationwide’s Group Economist, said: “Just like the weather, the housing market was unseasonably warm in September as August’s interest rate hike did nothing to cool the rate of house price inflation.”.

This means that in July 2006, the average house price stood at £194,454.

The DCLG has replaced the Office of the Deputy Prime Minister (ODPM) and is headed by Ruth Kelly.

House price inflation was higher than average in London, which had an annual increase figure of 7.1% in July.

The DCLG also stated that “The average price paid by first time buyers across the whole of the UK was £150,252 in June, while the average price paid by former owner occupiers was £213,309.”

This update has been the first since the Bank of England raised rates from 4.5% to 4.75% earlier in August. Fionnuala Earley, Nationwide’s Group Economist, said “The annual rate of house price inflation picked up for the third consecutive month in August. House prices are now 6.6% higher than at this time last year. This is the fastest annual rate of growth since April 2005 and almost three times faster than at this time last year.”

Although a further base rate rise is expected before the end of the year, Nationwide does not expect this to have any significant effect on house prices. Fionnuala added, “Even though we expect rates to increase to 5% – 25 basis points above the peak of the last cycle – current economic conditions, especially in the labour market, are still supportive. This means that rate rises are likely to only be a catalyst to the slowing we had already expected, rather than fostering a repeat of the 2004 slowdown.”