October house value increase may mean nothing

It was surprising to see that house prices jumped back up a little bit during the month of October and edged up by 0.4%, even though many fear that the economy may be headed towards a double dip recession.  The small increase put houses prices back into the positive for the first time in the last six months, leaving the prices a full 0.8% higher than at the start of the year.

Nationwide chief economist, Robert Gardner, stated that given the challenges that are facing the economy right now, the trend is encouraging but it does not significantly alter the fact that the housing market is still just barely staying afloat. The level of property transactions is still quiet and compared to 2010 house prices are still pretty flat creating an uncertain outlook. He added that as the economic recovery remains slow, it is likely that house prices will stay soft with prices slowly drifting over the next year.

Gardner also added that a closer look at house sales show that more affluent areas have seen an increase in sales with poorer postcodes showing a slower amount of sales. So-called wealthy sales have increased by about three percent since 2008, with these areas being mostly occupied by professional and managerial people and are located in rural and suburban areas.

Middle Britain has also seen a small amount of transactions, but urban areas have seen a slight drop off in transactions which, according to Gardner, may be due to the fact that first time buyers have decreased in numbers.

Areas that are defined as ‘hard pressed’ have seen their sales fall by about two percent since 2008.  Employment also seemed to play a role, as there has been a 6% increase in professional employment which is one reason why wealthy neighbourhoods may have seen an increase.