House prices make a strong start to 2010
2nd February
The latest Nationwide House Price Index reported that house prices continued to rise with a 1.2% increase in January, this following on from a 0.5% December increase. This has resulted in an annual increase of 8.6% with this figure expected to reach double digits by the end of this month for the first time since May 2007.
This rise was not wholly unexpected. Figures from the British Bankers’ Association showed that mortgage approvals, which generally lead price movements, rose again in December, to 46k. The average loan size also climbed to £141k, up 22% from December 2008. There are still risks. When, and by how much interest rates move will be critical to market prospects, especially with almost 60% of mortgage holders now on variable-rate deals.
The national economy as a whole expanded by a mere 0.1% despite the fact that we have now officially moved out of recession, with only the manufacturing and motor trades industries showing a more encouraging growth of 0.4%. The labour market has continued to see welcome improvement with unemployment falling in November for the first time since February 2008 and December saw a second consecutive decline in the number of jobless benefit claimants. These improvements in the headline jobless figures, however, hide some of the other adjustments that have been taking place in the labour market, most notably with regard to average pay Over the course of 2009, UK average earnings growth has fallen to the lowest levels on record, as many employers have opted to spread their cost reduction measures over a wider segment of the workforce by freezing or reducing pay.
