The National Picture

National Property Prices Average asking prices across the country rose by 0.7% in October, after a 0.2% rise last month. Properties are now on the market at £219,658. This is over £6,000 or 2.8% more than six months ago (April 2009:&

Year-on-year, asking prices are now 0.6% higher than in October 2008.

These sustained price rises since the spring provide further indication that the housing market has turned the corner, although there remain threats that recovery could be derailed by rising unemployment or further economic shocks in late 2009 and early 2010.

First Time Buyer Homes

FTB property prices have performed much less well than the market generally. They declined significantly from almost £175,912 in January 2008 to £153,460 in June 2008 – and continued to fall even after the wider market was starting to recover. Since June FTB prices have risen, but only moderately, by £1,153 or 0.8%. In October they stood at £154,613.

Despite the recent pick-up, FTB prices remain 4.1% lower than a year ago, reflecting the much greater pressure on affordability experienced by home buyers looking for cheaper homes.

FTB Affordability

Property purchase has become less of a financial stretch for FTBs than it was last year, as they benefit from a combination of lower property values and rising household earnings. On the other hand, while affordability improved steadily up until June, it has deteriorated marginally since then.

The ‘affordability gap’ (the deposit FTBs need to raise from their own resources once they have secured the maximum mortgage available) fell from £71,000 in January last year (2.3 times gross household income) to £56,400 (1.7 times income) in June.

Since then, the deposit needed by FTBs has crept up to just over £58,000 this month, or 1.8 times income. Even so, affordability is much better than at any time in 2008.

If affordability continues to deteriorate, prospective home purchasers may wish to consider entering the market sooner rather than later, especially as the Government’s

£175,000 stamp duty holiday will be withdrawn on transactions completed after 31 December this year.

Home Mover Prices

With FTB house prices still subdued, the pick-up of house price inflation is led by a stronger performance in the upper echelons of the market.

Properties in the home mover bracket are on the market at 7.0% more than a year ago, £286,776 compared with £282,348. This reflects the more comfortable financial situation of many looking to move home who have built up substantial housing equity over recent years.

Over the past 6 months, home mover prices have surged by 7.2%. They are up 1.6% month-on-month.

Differences Between Flats And Houses

As last month, houses significantly outperformed flats – although both property types saw higher prices this month. On an annual basis, houses are being offered at 1.5% more than a year ago (£241,420 versus £237,809) while flats are on the market at 2.1% less (£174,776 versus £178,490).

The differentiation between houses and flats reflects the ‘two tier market’ whereby the upper end of the market is much stronger than the entry level.

Prices By Property Size

Despite the downturn, prices for larger properties have been surging compared to those at the lower end of the market. 5+ bedroom houses now stand at an average price of £561,130 – up 2% month-on-month and 11.5% annually. In contrast, 2 and 3 bed houses, while enjoying slight monthly increases, are still seeing annual price declines – down 2.6% and 2.1% respectively.

The UK flat market is experiencing very similar trends to that of houses with larger properties enjoying strong prices. 3+ bedroom flats average out at £310,475 – a monthly and annual rise of 1.2% and 7.3% respectively.

At the other end of the market, prices for studio, 1 and 2 bed flats are showing fewer signs of recovery. Entry level studio/1 bed flats have suffered a monthly decrease of 0.3% along with an annual fall of 5.3% and are now standing at £129,504. Similarly, 2 bed flats, while enjoying a slight monthly lift of 0.3% in October, are still 3.6% cheaper than in October 2008.

Source: The Findaproperty.com House Prices and Affordability Index, October 2009