Signs of recovery boost housing hopes

Some economists are now predicting a dramatic upturn in the housing market following new evidence of recovery this week, writes Diane Coyle.

David Miles, a professor of economics at Imperial College, said: "There is a lot of pent-up demand that could suddenly come through in a short period. As soon as prices have risen enough to eliminate a lot of negative equity, we will get a big upswing." Ian Sheperdson, an economist at HSBC Markets, agreed. "In my view the housing market is set for a revival that will catch people unawares," he said.

The key figures behind these optimistic views are those pointing to a rise in the number of property transactions. According to the Inland Revenue, these jumped 10 per cent to 98,000 in January. Although they still languish 12 per cent below their level a year earlier, they were more than 25 per cent above the 1992 low.

The taxman's figures confirm recent survey evidence. A Royal Institute of Chartered Surveyors survey of estate agents reported a marked increase in activity, to the extent that there was a shortage of suitable properties for sale. More than 80 per cent of the agents said prices had stopped falling.

Interest in new homes has also risen, according to the House Builders Federation. Two-fifths of builders said reservations were higher in January than a year earlier. Roger Humber, director, said: "Since the turn of the year there has been growing evidence to suggest that the housing market is on the move." Peter Miller, a spokesman for the RICS and estate agency Black Horse, said: "People who have put off decisions, mainly first-time buyers, are now showing interest."