The average price of a new home stood at £219,172 in February, up +1.6% on the previous month.
Values continue to fluctuate on a month-by month basis, but nervous homebuyers should be reassured by the medium-term average, which has stayed steady at approximately £217,500.
Annual growth also rose in February, up by +1.9%. While concerns about mortgage availability and job security remain, the latest figures suggest the new homes market may prove more resilient than some analysts have predicted.
Each of the major indices has recorded a slight price rise in the last month, which will offer some encouragement to the market. However, it remains to be seen whether the significant uplift in the Rightmove index will translate into corresponding gains in the Nationwide and Land Registry data, or if estate agents are simply overvaluing to win instructions while stock levels remain low.
The regional picture supports the overall national view that the new homes market is proving resilient in a difficult economic climate, with many areas seeing positive price swings. It is noticeable however that the few red numbers that do appear are predominantly in the South East, which is traditionally the strongest performing area for the UK property market. With the ongoing restrictions in the mortgage market, first-time buyers in the region have found it especially difficult to obtain finance because of the higher house prices and so larger deposits needed.
New homes coming onto SmartNewHomes
While the number of new homes coming onto the market is on the rise, it must be remembered that the increase is calculated from a historically low base. Furthermore, the significant month-by-month volatility will fuel concerns that build rates could easily slip again to the record lows seen during the worst of the downturn.
The Institute for Public Policy Research (IPPR) estimates that if current trends continue then the UK is likely to be facing a shortfall of 750,000 homes by 2025. The industry would be well-placed to deliver the homes required, if only hands were not tied by the regulatory and financial environment.
Commenting on the data, Steve Lees, Director of SmartNewHomes said:
"The increase in the average price of a new home in February will come as a surprise to the hawks that have been warning of a weakening in consumer sentiment and justifies the guarded optimism of many in the industry. Public policy has caused the rate of development to lag behind consumer demand for many years now, so while the economic outlook remains uncertain, there remains a significant level of pent-up demand in the market, which should help to support sales.
“Having said that, the nature of the property market is such that consumer demand is always mediated by the mortgage industry, and developers remain wary that current highly restrictive lending practices may continue to hold back the market. The reaction of the mortgage market to a possible rise in interest rates, which is looking increasingly likely at some point in the coming months, will act as an important barometer for the medium-term outlook of the new homes market.”
To read the latest New Homes Index in full click here.
See Also: New Homes Index (22), Press Releases (371), New Homes Market (28), Mortgage Market (13), Mortgage Industry (13), Property News (6701)
Date Published: 28 March 2011
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