Data just released by the Nationwide building society suggests a mini recovery in the housing market. It said that house prices rose slightly in February by 0.3%, leaving them 0.1% lower than they were 12 months ago. Seasonally adjusted prices that are more or less flat over the last six months have prompted the building society to state that the housing market is “treading water.” The average house price cited by the Nationwide now stands at £161,183.
Commenting on the figures, Robert Gardner, Nationwide Chief Economist said: “This shouldn’t come as too much of a surprise – housing market trends are closely linked to wider economic prospects. Demand for homes has levelled out, supported by historically low interest rates and some stabilisation in the labour market.”
This slight rise in property prices may come as a surprise to some economists and commentators who have predicted sharp falls of 10% or more over the coming year. Although there is still time for that eventuality, the Nationwide takes a different view – predicting prices to remain flat or fall very slightly between now and the end of the year.
Although continued rationing of mortgage funding should be helping to undermine property prices, by restricting the number of potential buyers, there is evidence to suggest that a number of factors are keeping the volume of sellers low, and therefore helping to underpin property value. Sellers remain reluctant to accept lower prices to accept a sale and the so-called ‘buyer’s market’ is putting many off putting their properties up for sale at all.
Meanwhile the Bank of England said that the number of approved mortgages recovered slightly in January from its sudden dip in December. However, the 45,723 figure was still below the average figure for the previous six months. Some analysts believe that even this small revival may be somewhat misleading, as it could be just the catch-up from the snow-bound month of December.
Even with the Nationwide showing a marginal increase in property value and the Bank of England showing an increase in mortgages, there is no doubt that the housing market is currently on very shaky ground. The widely expected increase in interest rates could be very damaging.