House Prices - Beware By Debbie Morgan At Isnare.com Ezine Articles

House prices are on the rise but be careful, the rise may not last.

In recent years much of the British public have made property into a sort of hobby. The TV shows have followed enthusiastic DIY'ers doing up some half derelict house into a lovely family home, rub hands with glee over the profit that was made, or alternatively spend over budget and be coping with difficulties along the way. We've seen how to transform rooms in an hour, how to buy property at auctions, or how to build a house from scratch. And so on it goes.

With so much of our wealth invested in our property and with so much money having been made in the rocketing house prices up to August 2007 no wonder we are watching house prices closely. A lot of people have done well in the past. If we missed out on the good investments in the last round we want to be in the action if there is another rally.

However, be careful. In May house prices rose 2.6% compared with April and this was the fastest rate of growth since 2002 (Halifax) but is this sustainable? Is the wider economy supporting a rise in house prices? And as the end point, should you buy now if house prices are to continue to go up?

Let's see why house prices have gone up recently.

There is a combination of reasons to go in the pot. More new buyers are registering an interest and members from the Royal Institution of Chartered Surveyors reported that buyer inquiries increased in May for the seventh month in a row and at a fastest rate since 1999.

Yet, with the property market having dropped to such an extent would-be sellers are holding off putting their property on the market. New instructions have continued to fall with the average number of properties on an agents book having dropped from 69.4 to 58.4 in May. There are not many properties on the market and there are new buyers wanting to snap up seemingly cheap properties along with the low interest rate.

Plus it's traditionally the house buying season. Spring is the peak time of the year when people buy and sell property - interest usually picks up in February after the New Year, people can be settled in by the summer when the holiday period starts and then it's the new school year and getting ready for Christmas!

The economy may be seeing glimmers of good news but the Bank of England's latest Inflation Report warned that the economic outlook was still very uncertain. The unemployment rate is currently 7.1% (2.22 million) and many economists predict unemployment to go above 3 million or 10% in 2010. According to the Office of National Statistics, in previous recessions unemployment took about 6 years to return to pre-recession levels.

Finance for first time buyers, although is improving, is still limited and has strict lending criteria.

For house prices to stabilise there needs to be stability in the wider economy. For house prices to rise on a consistent basis employment needs to be falling and that seems highly unlikely in the near future.

If you want to buy now and find what you want then the chances are that you'll be buying at a good time. However, there's still a high risk that house prices will fall as unemployment rises and therefore you need to be prepared to hold it for a number of years.

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