UK House Prices Up Again in December Says Govt, But for How Long

Well hooray. UK house prices were 2.9% higher in December last year, than December the year before, according to the recent index released by the government Department of Communities and Local Government -- in other words according to official statistics.

This is fanning flames of positive sentiment that the UK housing market is in recovery, when there are still plenty of reasons to believe that prices are still likely to see a second catastrophic collapse.

The people who believe that this is going to happen will have seen one finding of the DCLG in bold, italic and underlined: the average price paid by first time buyers was 6.8% higher than last year, whilst prices paid by owner/occupiers increased by only 1.4% over the period.

Of course the biggest thing that makes those who believe another crash is looming is the lack of affordability for first time buyers, which was only partially corrected during the downturn, and has worsened again since prices started to rise. So, the fact that the prices paid by first time buyers is apparently rising faster is obviously a worrying indicator.

However, the DCLG index also found that the quarterly price rise had slowed, from a rise of 3.1% in the quarter ending September, to a rise of 2.9% in the three months ending December. As the quarterly index is the only measure seasonally adjusted by DCLG it is reasonable to suggest that it is their most accurate measure.

The other thing that makes people believe that a second coming is due in the UK housing market crash, is the weak economy. Yes, the economy finally emerged from recession in the fourth quarter of 2009, with a growth of 0.1%, which many people belief is most likely to be revised upwards. However, it won't be revised upwards by much, and the fall for 2009 as a whole at over 4% is the largest annual decline in British GDP since World War II.

Then you have unemployment, the last few reports from the Office for National Statistics have not been the barrage of negative data that they were, but even though they are showing that unemployment has just about stopped rising, they are also showing the employment is rising by anywhere as much as it needs to.

Then you have a lack of mortgage lending, and the fact that people with small deposits are being quoted hundreds more per month for a mortgage than those with a big deposit. All these factors are reducing the numbers of viable buyers, which is okay at the moment with supply still low, but if supply should rise then the current stability will be in jeopardy.

Not to mention the fact that we have an election coming up, and a government badly in need of cut-backs, all of which adds up to an uncertain future for the housing market and the economy as a whole.

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