House prices in Wales are up 2.4% year-on-year, according to the latest LSL Property Services Welsh house price index. The news has come as something of a surprise, due to the difficulties faced by many in obtaining a mortgage.
The average house price in Wales now stands at £152,448. In June 2011, the figure stood at £149,035.
There are significant regional variations in house prices in Wales. The Vale of Glamorgan saw the biggest increase in prices, at 18.1% (£221,134). Cardiff recorded a 5.2% increase (£182,841), followed by Denbighshire at 4.5% (£136,768) and Swansea at 2.7% (£154,634). Neath Port Talbot recorded an increase of 2.2% (£109,435) with Rhondda Cynon Taff close behind at 2% (£107,005).
Blaenau Gwent recorded the sharpest fall in house prices at -8.6% (£82,862), followed by Merthyr Tydfil -3.3% (£99,207).
LSL pointed out that lower house prices in Wales have made it easier for first time buyers to get on the property ladder than in England. They also discovered that a two-tier housing market has emerged, with prices supported by wealthy buyers.
Nigel Favas, MD of Reeds Rains, commented: “Given how difficult it is to get a mortgage at the moment, an annual rise in prices of 2.4% is a real victory for the housing market.
Predominantly, it is wealthier buyers and equity-rich retirees who are sustaining sales levels, which has helped nudge up prices. Prices have held up well, and even seen significant increases, in areas with plenty of wealthier buyers, but have fallen in areas with more first time buyers. The main stumbling block to a fluid housing market is a chronic lack of mortgage finance. It is marooning first time buyers in the rental market, which keeps sales levels suppressed and stops house prices growing.
To put things in perspective, sales levels are only half what they were in 2006. Lending criteria are becoming tighter, with banks more concerned about protecting their balance sheets, and they are reducing lending to buyers with small deposits, which will hit first time buyers disproportionately hard. The best the market can hope for over the next few months is to stagger on. On average, banks require deposits to be twice as large as they were before the 2008 financial crisis. Wales is also more exposed to public sector austerity than the UK as a whole. House prices at a local level will be closely tied to the performance of their immediate economies.
Source: LSL Property Services.