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If you have been watching the house price headlines, eagerly awaiting the right moment to invest in property once again it might be prudent to hold on and wait.

Experts are predicting that the current reports of house price increases are just a blip – they say that prices are rising because there are not enough houses for sale on the market – but if that changes, the rally may stop.

The latest Halifax house price index reports that prices rose by 1.6% in September, which was the the third consecutive rise Halifax has recorded. However, annual figures from Halifax are still down by 7.4%, and it predicts that as more people put their homes on the market, supply strains will ease and prices will fall once again.

Martin Ellis housing economist for Halifax says: “The combination of increased demand and a low level of properties available for sale has pushed up house prices in recent months. But continuing increases in unemployment and low earnings growth are likely to constrain the rise in demand. There are also some signs that the improvement in market conditions is encouraging more people to put their properties up for sale.

“This development could loosen market conditions by alleviating the current shortage of supply and curb the pace of house price growth evident in recent months."

This is bad news for buy to let investors, especially those who have hopefully begun to dip their toe in the water – in fact, enquiries from property investors rose by 100% over last 6 months, according to Halifax.

Keshav Thukaram, managing director of Smartlandlord.co.uk says: "This is just another indication prices are bottoming out – not that they are going to start shooting back up again in the medium to long term. We are still a long way from a full-blown recovery. The impact of higher unemployment still hasn't been felt by the economy for instance. These price rises are only being driven by a shortage of supply – not enormous levels of demand.

"Having said that, there are indications some sections of the market are stabilising. Investors are looking to buy property while it is cheap to maximise future yields. A lot of professional landlords had been waiting for the downturn for a long time. They're cash rich and many of them started investing in property during the last downturn."

SOURCE: Halifax, Smartlandlord, 06/10/09

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