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Nationwide UK House Prices 9.5% Inflation, Housing Market on Steroids, Help to Buy Anniversary

Housing-Market / UK Housing Apr 02, 2014 - 07:31 AM GMT

By: Nadeem_Walayat

Housing-Market

The Nationwide woke up today to the UK house prices boom underway by reporting that its HP inflation index had risen by 9.5% over the past 12 months to stand at £180,264 as average UK house prices home in on breaking their 2007 peak (-3%), something that London achieved over a year ago having since galloped ahead to stand at an average price of £362,699 which is more than 20% above its 2007 peak.


It is also now 12 months since the Coalition government's help to buy scheme started that initially targeted new builds but was extended to all properties which was brought forward to the 1st of October 2013 from its original start date of 1st of January 2014 that in my opinion sparked panic buying amongst many thousands of prospective home buyers who had been finding it near impossible to buildup deposits of 25% that mortgage lenders typically sought in terms of managing risk, however now the same mortgages can be secured with just 5% deposits as the government funds 20% of the deposit with an 5 year interest free loan which on the £600k valuation limit amounts to a huge difference between a previous cash deposit requirement of £150k against just £30k today under the help to buy guarantee scheme.

One year on over £2 billion has been committed under the help to buy scheme resulting in EXTRA demand of about 15,000 housing market transactions. Whilst academics may argue that the number of extra transactions is relatively small i.e. at about 2500 per month amidst a total of around 70,000 (3.5%). However, what the academics repeatedly fail to comprehend is that bull and bear markets are made at the margins, and then driven by sentiment. Therefore a marginal increase in demand of 3.5% per month is enough to generate strong positive sentiment that gains momentum each month resulting in a full blown house prices boom for 2014.

What Does this Mean for House Prices ?

Well, effectively injecting 20% of tax payers money into the value of homes implies that house prices should ultimately be inflated by an EXTRA 20% i.e. in addition to the preceding market trend and momentum, as I illustrated in an article ahead of the October help to buy expansion of what to expected in terms of the ramping up of the housing market towards igniting an election economic boom that at least targeted a trend trajectory of 10% per annum for 2014. Especially as the news of the day was also accompanied by another wave of out of control immigration that continues to play its part in fuelling housing market demand.

And another point that the mass media ivory tower academics and journalists who think they are economists fail to comprehend is that help to buy acts to LEVERAGE and INFLATE the WHOLE housing market and not just the marginal transactions because house prices are relative to one another i.e. each higher sale pulls ALL of the houses in the street / area up with it. So now you will understand more than all of the talking heads who will be busy today such as on BBC Breakfast News stating that the Help to Buy Scheme is only helping a small percentage of house buyers so cannot possible cause a housing market boom.

29 Sep 2013 - David Cameron Brings Forward Help to Buy Mortgages, Stoking House Prices Bubble, Election Boom

It's not rocket science, it's actually quite simple: Limited Supply + Quadruple Demand = House Prices Boom!

The strategy in bringing forward of the Help to Buy Scheme for all properties is clearly aimed at building on housing market sentiment towards a trend trajectory of average UK house prices rising at a rate of at least 10% per annum, which is precisely inline with my forecast momentum for UK house prices to be rising by 10% per annum as of October 2014 data, and all the way into Mid 2014.

Yours analyst waiting for the PANIC Buying headlines in the mainstream press. Forget under offers, it's offers OVER for an increasing number of areas of the country as I warned several weeks ago - Final Warning UK House Prices Boom Imminent!

The bottom line is to take this as your final warning for a UK house prices boom as those waiting on the sidelines have only a matter of weeks to act before housing market sentiment responds to a market that is rising at a rate of more than 10% per annum. The days of under offering for good houses in good locations is about to end

David Cameron prompted to respond to help to buy demand news and house price bubble fears replied - "Where we are today, house prices are still way below the peak they reached in 2007. Forecasters do not think they will get back to the level before the crash even in 2019. So there is no evidence of a problem."

Well, if the UK house prices trend pans out as I expect then average house prices will have reached their 2007 highs BEFORE the May 2015 general election and have soared far into the stratosphere by 2019 as I elaborate upon next.

UK House Prices Forecast 2014-2018

My in-depth analysis of UK house prices during December 2013 concluded in a detailed trend forecast for the next FIVE years from 2014 to 2018 that house prices target an average gain of 10% per year totaling 55% by the end of 2018 as illustrated below:

UK House Prices Forecast 2014 to 2018 - Conclusion

This forecast is based on the non seasonally adjusted Halifax House prices index that I have been tracking for over 25 years. The current house prices index for November 2013 is 174,671, with the starting point for the house prices forecast being my interim forecast as of July 2013 and its existing trend forecast into Mid 2014 of 187,000. Therefore this house prices forecast seeks to extend the existing forecast from Mid 2014 into the end of 2018 i.e. for 5 full years forward.

My concluding UK house prices forecast is for the Halifax NSA house prices index to target a trend to an average price of £270,600 by the end of 2018 which represents a 55% price rise on the most recent Halifax house prices data £174,671, that will make the the great bear market of 2008-2009 appear as a mere blip on the charts as the following forecast trend trajectory chart illustrates:

Additionally, a video version of excerpts of the forecast analysis is available -

UK House Prices Forecast video

Furthermore the analysis and forecasts just form a part of my NEW UK Housing Market Ebook that contains extensive home buying, selling, maintenance and improvement guides that will shortly be made available for FREE DOWNLOAD from Mid April 2014. Ensure you are subscribed to my always free newsletter for regular housing market updates as well as the FREE ebook download.

Source and Comments: http://www.marketoracle.co.uk/Article45053.html

Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2014 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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