The year started with a rise in house prices and property listings, but Nationwide reckons prices could stay flat or even fall in the next two years, so there is still some way to go before recovery kicks in
Property asking prices rose on average by more than 3% in the first four weeks of 2010, a Rightmove report revealed. Over the same period in 2009, property listings also rose by more than 20% indicating that sellers had perhaps taken the decision to sell hoping they had seen the back of the bottom of the market.
Before we get carried away let’s not forget that this is still almost 40% below the average listing for the same period between 2005 and 2008, so we still have some way to go before we can get the bunting out.
A 3% jump over this period is comparable to the boom times and coming in the face of the heavy snowfall much of the country experienced in January, is impressive.
But it is not an indicator of recovery and not something estate agents want to continue. This is because it puts more upward pressure on prices, especially as around one in four sales are now made up of first-time buyers, who are an important bedrock of the property market and crucial if the housing market is to maintain a long term recovery.
But the Royal Institution of Chartered Surveyors reported that the number of sales recorded per surveying firm fell from 19 to 18 in the same month.
Meanwhile, the sales-to-stock ratios largely seen as an indicator of the untapped slack in the market and a lead indicator of future prices fell for the second successive month. That may simply be due to Christmas followed by the cold snap in January and we could see a spring bounce once we emerge from what has felt like a long cold winter.
Before we get carried away let’s not forget we still have some way to go before we get the bunting out
Looking forward, Nationwide, Britain’s biggest building society, said last week that house prices could stay flat or even fall in 2011 and 2012 despite the recent rally, adding to growing fears of a double dip in the property market. It has also forecast no growth for this year, meaning prices could stagnate for a full three years.
Figures from Halifax this month showed the recovery started to slow in January with a 0.6% rise in property values which was the lowest monthly increase for six months.
Nationwide’s index was more bullish, saying house prices rose by 1.2% last month and are up 8.6% year-on-year. It thinks house price inflation could top 10% next month, before falling back as interest rates start to increase and unemployment continues its upward journey.
Meanwhile, the Centre for Economic and Business Research has revised up its forecast on house prices from a 4% rise to 6% over 2010, on the basis that interest rates will remain low. It also expects mortgage approvals to rise. While house prices were likely to falter again in 2011, values would rise 20% by 2013, it said.
The more stable housing market has allowed lenders to come in with some better deals in recent weeks, but they could be as good as it gets.
The Council of Mortgage Lenders has also warned of an ongoing mortgage drought as lenders face a £300bn funding shortfall. Lending has dropped 60% in the past two years, the CML said.
Several lenders have also increased their SVRs since the start of the year. Skipton Building Society will increase its SVR from 3.5% to 4.95% next month. This in turn may stimulate the remortgage market as many home owners look to save money.
Steady as she goes but we aren’t out of the woods yet.
Kevin Paterson sales and marketing director Assurant Intermediary