Another day, another piece of gloomy data from the UK economy.
This time it’s real estate.
The Halifax house price survey for April:
As usual the Halifax’s Martin Ellis takes the Panglossian view:
The latest figures show that the underlying trend in house prices continues to be one of modest decline. Prices in the three months to April were 1.2% lower than in the previous three months. There was a 1.4% fall in prices in April following no change in March.
“Weak confidence amongst households, partly due to uncertainty over the economic outlook, is constraining housing demand and resulting in some downward movement in prices. Signs of a modest tightening in housing market conditions, a relatively low burden of servicing mortgage debt and an increase in the number of people in employment are all likely to be providing support for house prices, curbing the pace of decline. There are signs that house sales are stabilising albeit at a level lower than the historical average.
We, of course, aren’t.
This report and the April survey from the Nationwide all point to further declines for the housing market. And the prospect of rising interest rates before the end of the year, negative real income growth and problems accessing mortgage finance don’t bode well for house prices.
Indeed, as Howard Archer of IHS Global Insight notes that latest Bank of England mortgage data is at a level associated with falling house prices:
While the Bank of England reported that mortgage approvals for house purchases rose modestly to a five-month high of 47,557 in March from 46,708 in February and a 21-month low of 42,859 in December, it needs to be borne in mind that mortgage approvals have actually averaged around 90,000 a month since 1993. Furthermore, a level of 70,000-80,000 has in the past been considered consistent with stable house prices. The Bank of England also reported that net mortgage lending amounted to just £0.4 billion in March after a rise of £1.0 billion in February. This was the consequence of both recent low mortgage activity and a desire of a significant number of homeowners to reduce their debt by paying off more of their mortgages.
On balance he sees house price declining a further 5 per cent to 7 per cent from their current levels.
Related links:
S&P sees eurozone, UK housing headwinds on swelling rates – FT Alphaville
How big the BoE’s interest rate bind? – FT Alphaville
A 75bps rate rise could cost consumers £6.2bn, Deutsche says - FT Alphaville