House prices rise but recovery still some way off
House prices from Nationwide rise for third consecutive month among market pessimism
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By inthenews. |  |
Thursday, 30, Jul 2009 09:25
House prices have risen for the third consecutive month, according to Nationwide, but economists are pessimistic of a sustained market recovery.
The building society said prices were up 1.3 per cent for July, but warned falling construction could mean a "shortfall in supply" in the longer term.
The average price of a home in the UK now stands at £158,871, according to Nationwide, with the three month rate of change, a better indicator of short-term changes, at its highest level since February 2007.
Martin Gahbauer, Nationwide's chief economist, said the latest statistics may point to a recovery in the housing market by the end of this year. He said: "House prices are still 6.2 per cent lower than 12 months ago, but this represents another sharp improvement from the 9.3 per cent year-on-year decline in June.
"Even if prices were to remain unchanged for the rest of 2009, the year-on-year rate would continue to improve since prices were falling very sharply in the second half of last year.
"For the first seven months of 2009 as a whole, prices have risen by a cumulative 1.3 per cent, suggesting there is now a reasonable chance that prices could end the year slightly higher than where they started. Only a few months ago, such an outcome would have appeared unthinkable."
Figures from the Bank of England earlier this week indicated a rise in mortgage approvals, a key indicator the housing market was beginning to recover. The Land Registry, whose figures are based on completed transactions and so lag behind other indices, said on Tuesday figures for June showed the first positive change since January 2008.
Despite the apparent positive results, housing market professionals remain pessimistic of a sustained recovery.
Andrew Montlake, director at independent mortgage broker Coreco, said: "Sorry to be the party pooper, but while today's figures are positive news, it is still extremely difficult to arrange mortgage finance for the majority of prospective buyers.
"Unless you have a sizeable deposit, a good salary, a safe job and a faultless credit history, you'll struggle to be accepted for a loan."
The Royal Institution of Chartered Surveyors (Rics) also pointed to the problem of obtaining finance, saying a recent survey "suggested that around ten per cent of housing transactions are breaking down because of problems with obtaining finance".
Howard Archer, chief UK and European economist at IHS Global Insight, was also cynical about today's figures: "While it looks increasingly likely that February marked the trough in house prices, we suspect that they will be prone to relapses over the coming months and we certainly do not think that a sharp sustained upward trend in house prices is in the process of developing.
"We doubt that the economy will see sustainable recovery until around mid-2010 and suspect that unemployment will rise markedly further and wage growth will remain low, which does not bode well for house prices," he added.
Sarah Garrod