Homeowners advised to spend to make house prices work

06 May 2003
The Centre for Economics and Business Research has advised homeowners that 'House prices will work for you if you work on your house.'

The CEBR explains that rising house prices make housing a good bet in terms of financial investment, but costs of keeping this investment alive is more than most homeowners think if DIY spending is included.

The centres housing model predicts that from 2005 till 2020 an average house in the UK will appreciate at an annual rate around 5.2 per cent and reveals that, given the current stock market turbulence, there are few alternative investments that can beat this rate of return

At the end of the first quarter of 2003, the average house price was just below £125,000 according to the Halifax. In twenty years, it will rise above the £300,000 mark.

The CEBR report attempts to factor the cost of housing improvements spending into house prices. Official figures tend not to show the full extent of spending though they do show that spending on housing repair and maintenance were around £10 billion in 2002.

However, this figure falls well short of the £8,000 per annum for an average property owner, which the CEBR estimates for the average homeowner.

The CEBR statistics also show a marked regional pattern that corresponds to the state of regional housing markets. In 2001, when London housing market was strong, Londoners spent around £1,500 per quarter comparing to the national average of £1,350, according to the Alliance & Leicester's Movingimproving index.

However, by the end of 2002, London house prices stopped growing as fast as before, and East Midlands (where prices had risen by more than 25 per cent that year) became the leading DIY spender.

The most likely parts of a house for owners to spend time, money and effort on are the kitchen, bathroom and the garden.

The UK is at the top of the DIY spending league among fellow Europeans, just after the Germans, Swedes and Finns, according to European Commission figures.

This is largely a reflection climate, which necessitates more external maintenance, and the fact that a larger proportion of Mediterranean residents live in apartments.