The latest Nationwide house price survey shows that prices rose by 0.9% in June. This not only presents further evidence that prices are beginning to recover, but marks the first three month increase in house prices since December 2007.
No celebrations yet
Nationwide warns that despite the optimistic signs, the trend should not be misinterpreted as a return to strength in the housing market. There remains a low level of supply and weak activity by historic standards. There are still risks to a sustained recovery.
Martin Gahbauer, Nationwide’s chief economist, says: “The price of a typical house rose by a seasonally adjusted 0.9% in June, building upon the improving trend seen over the last several months. At £156,442, the average house price across the UK was still 9.3% lower than a year ago, but this marks the first time since July 2008 that the year-on-year fall has been in single digits.
“The three month on three month rate of change – a smoother indicator of the short-term price trend – turned positive for the first time since December 2007 to stand at 0.9%, up from -0.4% in May.
“If the pattern of price movements seen in the first half of the year is repeated over the second half, then prices could show only a small single digit fall for 2009 as a whole. This would represent a stark shift from trends seen at the turn of the year, when most indicators were pointing to a repeat of the large declines seen in 2008.”
Homes selling quicker
There are also signs of improvement in market conditions in the latest Hometrack survey. While this reports that prices in June remained static compared with May, other indicators are positive. There was an increase in June in the percentage of the asking price being realised (91%, up from 90.3%) and a fall in the average time on the market (9.4 weeks, down from 9.9 weeks).
Richard Donnell, director of research at Hometrack, says: “A lack of supply and rising demand have combined to prop-up house prices in the last two months. Over the last six months, the volume of buyers has grown by 36%: this compared to a 6.4% increase in the number of homes for sale.
“In London, the increase in demand for housing – +52% – has been almost tenfold compared to the growth in the supply of homes for sale – + 5.6.”
Over the course of the year, says Donnell, home sales have jumped by over 80%, from the slump levels of January. He adds, though, that economic uncertainty places doubts over the sustainability of demand.
A survey of surveys, conducted by Assetz, also shows an improving situation so far this year. This has persuaded the property investment group to change its mind on its previously pessimistic outlook for house prices this year, which it now believes will increase.
Past the worst
The Assetz House Price Watch – which pulls together the results of all the various major house price indices – reports that prices were up by 1.1% in May and that the market is on the rebound.
“All indicators now suggest that we have passed the bottom of the house price curve,” says Stuart Law, chief executive of Assetz. “While we can’t read too much into one set of figures alone, all the major indices and the recent RICS survey are all indicating an end to falling prices and an increase in activity.”