Signs of recovery in housing market
The property market experienced tentative signs of recovery in April, according to the Nationwide building society.
April saw a 0.5 per cent rise in house prices after seven consecutive falls, with annual rate of house price growth rising to -2.7 per cent from -3.1 per cent in March, says Robert Gardner, Nationwide’s chief economist.
“While annual house price growth remained negative in April at -2.7 per cent, there were tentative signs of a recovery with prices rising by 0.5 per cent during the month (after taking account of seasonal effects).
“April’s monthly increase follows seven consecutive declines and leaves prices four per cent below their August 2022 peak.”
He says recent Bank of England data suggests that housing market activity remained subdued in the opening months of 2023.
The number of mortgages approved for house purchase in February was nearly 40 per cent below the level prevailing a year ago, and around a third lower than pre-pandemic levels.
However, in recent months industry data on mortgage applications have pointed to signs of a pick-up.
“This also chimes with the recent shifts in consumer sentiment,” he continues.
“While confidence remains subdued by historic standards, people’s views of their own financial position over the next 12 months, and general economic conditions in the year ahead, have both improved markedly in recent months.
“If inflation falls sharply in the second half of the year, as most analysts expect, this would likely further bolster sentiment, especially if labour market conditions remain strong.
“This, in turn, would also be likely to support a modest recovery in housing market activity.”
But, he adds: “Any upturn is likely to remain fairly pedestrian, as it will take time for household finances to recover, since average earnings have been failing to keep pace with inflation, and by a wide margin over the last few years.
“Mortgage interest rates are also likely to act as a headwind. While they are well below the highs seen in the wake of the mini-Budget last year, rates are still more than double the level prevailing a year ago.
“Nevertheless, if gains in nominal incomes remain solid (wage growth has been running at above seven per cent in the private sector), this, together with weak or declining house prices, will help improve housing affordability over time, especially if mortgage rates continue to trend lower.”