LONDON’S rising house prices could be a mirage, experts have warned today.
Recent figures showing a near 5% increase in property prices in the last three months in the capital have been hailed as one of the fabled ‘green shoots’ that are meant to be dragging the economy out of recession.
But one of the main reasons for this rise is that people are scared to sell, with prices still 10% lower than a year ago. This has led to many fewer houses being on the market, reducing supply and helping the headline price.
Martin Gahbauer, chief economist of the Nationwide Building Society, told the Financial Times that the fact so few properties were for sale was giving prices a boost. Apparently, mortgage applications are at 55% of their normal levels.
There are also warnings that when interest rates go back up from their historic lows, prices will take another hit.
“With interest rates currently at unusually low levels, initial affordability may therefore be painting a misleading picture of the true position,” economist Roger Bootle told the citywire website.