RISING house prices are, in the normal run of things, something to celebrate but recent frantic growth has made Britons nervous. Fears are now growing of a bubble in London, where prices have risen by an astonishing 17 per cent in a year, according to figures from the Office for National Statistics (ONS).
A combination of low interest rates, renewed economic confidence and various Government stimuli, such as the Help to Buy scheme, are forcing prices up across the UK.
This has left many would-be buyers feeling reluctant about paying today?s inflated valuations and worried about what will happen if interest rates start rising next year, as is widely expected.
At the same time, delaying could backfire if prices rise still higher. So what should you do right now?
The property market is awash with confidence and activity, especially in London and the South-east, says Oliver Atkinson, director at UrbanSalesAndLettings.co.uk.
?In some areas open days and sealed bids are the norm with transactions often completing in days,? he says
But despite all the hype you aren?t buying into a bubble, explains Kevin Hollinrake, managing director of estate agent Hunters.
?We are experiencing high demand for property and I expect prices to continue rising across most parts of the country,? he says.
London?s amazing growth has been driven by the influx of UK investors and foreign buyers, says Nick Barnes, head of research at estate agent Chesterton Humberts.
He expects this growth to continue, with prices across London rising another 50 per cent over the next five years; the South-east and East Anglia, he adds, should grow another 30 per cent in that time.
If you?re buying outside of London and the South-east there is no need to panic, according to Stephen Smith at the Legal & Generalmortgage Club.
?The UK has a two-speed housing market,? he says. ?If you exclude the booming capital and South-east, house prices are rising at a moderate 4.7 per cent a year, ONS figures show.?
In some northern areas prices have barely risen at all, says Robin King, director of residential property expert, Move with Us.
?In the North-east, the average price is £153,413 and the average selling time is 181 days,? he says. ?That compares to an average £438,118 price in Greater London and an average selling time of just 47 days. They?re worlds apart.?
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Edward Heaton at property search company Heaton & Partners, agrees that prices are behaving differently in different parts of the country.
?We?ve just sold a house in a prime West Berkshire site for 20 per cent above the guide, yet a lovely house in Yorkshire?s had only a few viewings,? he says. In Scotland the average home is going for about £8,000 less than the asking price, according to Wendy Pauley from property site, S1Homes.
?The biggest uncertainty is the prospect of Scottish independence and the impact this could have on prices and interest rates,? she says.
Prices will rise as long as rates remain low, says Stephanie McMahon from estate agent Strutt & Parker.
?The balloon will deflate only when cheap money comes to an end,? she says, but she expects a slow return to normality, with prices rising in line with employment, wages and supply.
Property prices have been driven up by more than five years of record-low interest rates but they won?t stay low.
Indeed, the Bank of England?s retiring deputy governor, Charlie Bean, warned that the base rate could rise from today?s 0.5 per cent to 3 per cent within three years. That may push mortgage rates to 7-8 per cent.
If that happens, one in four owners may struggle to pay a mortgage unless they lock into a low-cost fixed rate, the Resolution Foundation claimed.
Yet only one in 10 homeowners are planning to remortgage in the next six months to protect themselves against a rate hike, claims credit reference agency, Equifax. If you?re worried about rising rates, protect yourself by taking out a five-year fix, says Adrian Anderson of broker Anderson Harris.
?These are competitively priced and give protection in the medium term.? Although some have increased rates in recent weeks, there are still some competitive deals available.
Coventry Building Society, for one, has a five-year fix at 65 per cent loan-to-value (LTV) with a rate of 3.09 per cent, while the Post Office charges 3.69 per cent on a five-year fix at up to 85 per cent LTV.
It?s also worth taking advantage of low rates to overpay your mortgage.
?This cuts your total debt and your monthly interest repayments,? adds Anderson.
If you?re looking to put your home on the market now?s a good time to sell, according to Michael Bruce from online estate agent PurpleBricks.com.
?It is a seller?s market,? he says. ?There?s a shortage of stock as we head into the busiest part of the year. Buyers are snapping up properties quickly and often paying well over the asking price.
?Demand could slow this year so if you want to maximise the price you get for your property sell now.?
Now could also be a good time to bank your profits in the overheating London market, says Ian Samuels, who is the author of Property Tycoon: A Seven-step Guide To Becoming A Property Millionaire.?
?I see demand in the capital waning before the end of the year,? he says.
Prices in the rest of the UK, he adds, still have plenty of catching up to do.
?Supply is failing to keep up with demand, which has been partly fuelled by Help to Buy and a first-time buyer backlog,? he says. ?I expect prices to rise for the next three to four years.?
If you?re thinking of moving up the ladder there is no point delaying in the hope of getting a better price for your existing house, says Adam Day from online estate agency Hatched.co.uk.
?I expect prices to rise by another 10 per cent in the next 12 months,? he says. ?If that happens, that might put your next house further out of reach.
?Your property may rise by, say, £25,000, but the one you want to buy may go up by £35,000 so you?ll soon be £10,000 down on your purchase.?
Is now a good time to buy?
Many buyers will be nervous about overstretching themselves to climb the property ladder. At the same time the threat of rising interest rates will only add to their anxiety.
Buyers are right to be cautious, says Stuart Law from property investment group, Assetz. ?With house prices rocketing, however, it is just as dangerous not to buy as you may have to pay a lot more later.?
For most people a home is a home rather than an investment, says Alan Cleary, managing director at specialist mortgage lender Precise Mortgages.
?If you find a property you like and you can afford it then there is no point waiting in the hope that house prices will fall because it isn?t going to happen? he says.
That said, don?t be panicked into buying a second-rate property.
?There are a lot of bad properties out there that require a lot of work so make sure you know what you are getting into,? says Nicholas Ayre from buying agency Home Fusion.
New homeowners spend on average £4,205 fixing ?hidden? problems with their property such as damp, rot and structural defects, according to new research from insurer LV=.
The current market frenzy has worsened the problem it found, with one in five buyers saying they were pressured into making a decision virtually immediately or risk losing the sale.
The key is to do your homework before you buy.
Bank chiefs are poised to take the heat out of things
In recent weeks there has been growing talk of the Bank of England, whose Governor is Mark Carney, pictured, stepping in to cool down the housing market.
While most don?t expect the bank to raise interest rates until next year there are indications it may take other measures, such as capping the amount people can borrow in relation to their income.
Some lenders have already pre-empted this, with Lloyds Bank moving to restrict lending to a maximum four times the income for applicants buying properties worth more than £500,000.
The mortgage industry is now also operating under tough new rules designed to clamp down on irresponsible lending.
Under Mortgage Market Review guidance, borrowers should be ?stress-tested? to demonstrate that they can afford to service their mortgage, even if their interest rates subsequently rise sharply.
That may also take a little bit of the heat out of the housing market and prevent borrowers from getting overstretched.
There has been talk of scrapping Help to Buy, although recent evidence suggests that it is helping people climb on to the bottom of the housing ladder.
