Few green shoots here.
The latest house price survey from the Halifax is not only weaker than expected – economists had forecast a fall of 1 per cent on the month – but it also includes the following warning from Martin Ellis, chief economist.
Rising unemployment, low consumer confidence and the reduced availability of credit are all expected to exert downward pressure on the housing market over the next few months. As a result, further house price declines are likely.
Here are the other salient points from Tuesday’s release;
- House prices declined by 1.7 per cent in April. This was slightly less than the 1.9 per cent fall in March.
- The UK average price has returned to where it was five years’ ago in April 2004 (£154,511).
- House prices in April were 17.7 per cent lower on an annual basis.
- Prices in the three months to April compared to the previous three months – an indicator of the underlying trend – were 3.3 per cent lower. This is slightly below the quarterly rate of decline of 5-6 per cent recorded consistently between June 2008 and January 2009.
- Tentative signs of a stabilisation in activity albeit at a very low level. Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase – a leading indicator of completed house sales – increased by 19 per cent between the final quarter of 2008 and the first quarter of 2009, on a seasonally adjusted basis. Approvals in March, at 39,230, were the highest since May 2008, but were still 34 per cent lower than in March 2008.
Update:
Some reaction from Capital Economics.
The improvement in buyer interest in recent months is not enough to put a floor under house prices. Credit conditions need to ease and the economy needs to recover before this correction can be brought to an end.
There has been much talk recently of an improvement in housing market conditions. True, buyer interest has been strengthening and mortgage approvals appear to have troughed. However, these improvements are not sufficient to bring an end to this correction. We think that mortgage approvals need to at least double before they can be expected to stabilise house prices.
Unfortunately, for that to happen, we think that credit conditions need to ease and, more importantly, the economic outlook needs to be considerably brighter than it currently is. The rise in unemployment has much further to go, average earnings growth will remain subdued, and the recession is set to continue through the remainder of this year.
Accordingly, while the next few months may bring evidence of improving buyer interest and rising activity, we doubt that it will be sufficient to stop house prices from falling considerably further.
Related link:
Despair! UK house prices fall, or the battle of mortgage data providers – FT Alphaville