House market up 5% on previous year

More homes have been sold in the UK in 2012 than previously thought, as a result of greater mortgage availability, industry figures suggest.

 

There were 930,000 property transactions in 2012 – 13% more than the previous estimate of 825,000 and 5% more than 2011, according to the Council of Mortgage Lenders (CML).

 

Its chief economist, Bob Pannell, said this was a result of a "benign" environment created by the government's Funding for Lending (FFL) scheme, as well as positive effects felt from European Central Bank efforts to support eurozone members.

 

Repossessions in 2012 were far lower than the CML had originally predicted, with 35,000 possessions against an initial estimate of 45,000. The forecast for 2013 is a static 35,000 repossessions, rising to 37,000 in 2014.

 

In late-November, the CML said there were encouraging signs that the FFL scheme to encourage banks to lend to mortgage borrowers was beginning to filter through to the first-time buyer market, with an increase in the number of first-time buyers across the UK.

 

In London alone, it said 10,000 first-time buyers had taken outmortgages on properties from July to September – the highest number to buy a home in the capital during a single three-month period for almost three years.

 

The CML now believes the housing market will "grow and improve" in 2013, with a predicted 950,000 property transactions, as household incomes stabilise and slowly recover. But the organisation said that the positive effects of the FFL scheme will fade by early-2014, resulting in lower property transactions in that year.

 

The CML's director general, Paul Smee, added: "Sustainable growth will characterise the market of the future."

 

Mark Dyason, director of independent mortgage broker Edinburgh Mortgage Advice, said: "There's no doubt that the Funding for Lending Scheme is working best in the areas of the market that were already most competitive.

 

"All areas of the mortgage market have seen lower rates, and some to record low levels, but high loan-to-value mortgages have not seen the increase in volume we had hoped for. We'll get growth in 2013, the question is how much?"

 

Despite the surprise rise in property transactions in 2012, the total remains far below the highs seen while the property market was booming in 2006 and 2007. In 2006, the first year for which the CML holds details for the whole of the UK, there were 1.67m transactions; in 2007 there were 1.61m.

The CML said there are many threats that could destabilise the housing market, in particular "the disorderly break-up of the eurozone".

 

Howard Archer, global economist at IHS Global Insight, said: "We suspect that any significant, sustainable turnaround in house prices is still some way off. We believe that house prices will be broadly flat over the coming months. However, there could well be significant monthly fluctuations in house prices, with bouts of weakness."

 

The CML also said there was a small increase in gross lending in November, from £12.78bn to £12.9bn, helped by low mortgage rates and greater mortgage availability.