The Nationwide’s house price index could be a ray of hope for homeowners – it showed a rise of 1.2% for the month of May. This is the second rise that the bank has cited in the last three months. The average price of a home now stands at £154,016, which is a similar value to that of March 2005. Other statistics that the Nationwide produce are the annual rate of fall, which has recovered from 15% to 11.3%, and the quarter on quarter indicator, which also eased from -3.0% to -0.5%.
Although these figures are better news, the bank is refusing to get carried away. The Nationwide’s chief economist Martin Gahbauer said: “Although the short term trend in house prices has clearly improved from where it was at the beginning of the year, it is still too early to say that the market is turning definitively.” He went on to comment on similarities with the downturn of the 1990s and suggested that there were more price declines on the horizon because of rising unemployment and ‘tight access to credit’. On a more positive note Mr Gahbauer also said: “The improvement in house price trends is consistent with signs of stabilisation in several other economic indicators and suggests that any further price declines may occur at a less rapid pace than in 2008.”
Recent figures coming from property information specialist, Hometrack, also suggest a stabilisation in the market as they cite the annual decline at 9.6% - an improvement on the 10.1% stated in April. That was the first bit of positive news to come out of Hometrack for some time as they have reported 20 consecutive months of falls. Land Registry statistics for April showed an overall fall of 0.3% in house prices but six out of ten regions surveyed actually showed a rise.
Although estate agents are telling us that there has been a rise in potential buyers since the turn of the year, the Royal Institute of Chartered Surveyors (RICS) say that agents are still selling less than one property per week, on average. The Council of Mortgage Lenders (CML) and the Bank of England have recorded steady rises in approved loans for home buyers. However, lending levels remain very low – down 65% on the market peak in 2007.
Most economists remain pessimistic by highlighting the fact that these small recoveries in the market are fuelled simply by a lack of housing stock. The chief UK economist at IHS Global Insight, Howard Archer said: “The second rise in house prices in three months will obviously fuel speculation that the housing market may be turning as it is fuelled by sharply reduced mortgage interest rates and the substantial fall in house prices from their 2007 peak levels. The Nationwide also indicated that house prices are currently being supported by the lack of new properties coming on the market. However, we remain highly sceptical that house prices have bottomed out.”