The housing market has teetered on the edge of recovery and collapse for the past couple of years. A recent rise in prices in March suggests that the housing market may begin to see a new rebound. However, prices remain particularly depressed over the past few years.
The value of houses increased 2.2% last month. This is a substantial increase, which may allude to a new housing recovery. However, the one time gain doesn’t change the fact that the housing market is more depressed overall than it had been in years past.
The average value of houses throughout the UK is down about a tenth of a percent since the same quarter last year. However, the year-over-year value of houses throughout the area is down 0.6%.
Expiration of the Stamp Duty Exemption
The sudden rebound in houses throughout the country was likely due to more people buying new houses to take advantage of the tax duty before it expired. The tax duty was enacted to encourage more people to take advantage of the opportunity to save money on taxes. However, it expired towards the end of March.
Although March’s price increase is encouraging for everyone looking for a housing recovery, it may not be the beginning of a sustainable housing recovery. The expiration of the tax duty exemption was a one-time thing. Whether or not the demand for new houses will continue in the coming months will remain to be seen.
However, some experts feel that the increase in demand from the stamp tax duty may encourage long-term demand for housing. It has helped increase sales, which may help stabilize prices in the long-term. Their theory may be correct, but it is also possible that they are failing to spot another housing bubble. Both remain to be seen. These economists seem to be in the minority, as most feel that the demand for housing after the expiration of the tax duty will continue to drop.
Housing prices are still drastically below where they were before the onset of the recession.
While some economists are hoping for a housing recovery, Howard Archer, lead economist for IHS Global Insight feels the trend may be headed in the other direction. Archer believes housing values will decrease by another 3% by the end of the year.
This month’s housing market has shown improvement. There is still a long road ahead and much more improvement will need to be done to turn the housing bubble around.