UK house prices rose for the first time in eight months in April, halting for now the worst slump in 14 years, one of the country’s biggest mortgage lenders said.
(Bloomberg) — UK house prices rose for the first time in eight months in April, halting for now the worst slump in 14 years, one of the country’s biggest mortgage lenders said.
Nationwide Building Society said its measure of home values rose 0.5% last month after a 0.7% drop in March, the first increase since August. Economists had expected declines to continue, and the March figure wasn’t quite as bleak as previously estimated.
“There were tentative signs of a recovery,” Nationwide’s Chief Economist Robert Gardner said in a statement Tuesday. “In recent months industry data on mortgage applications point to signs of a pickup.”
The figures open the prospect that house prices may not slump by 10% or more as economists have warned. Soaring inflation and interest rates have strained affordability of new homes, but a lack of supply of properties coming to market has helped keep prices buoyant.
Nationwide’s figures have for months shown sharper declines in the market than rival mortgage lender Halifax. Analysts watch those two surveys, based on lending in each of the bank’s books, for a signal for where the broader housing market is headed in official Land Registry statistics.
“One month does not make a trend and, given the degree of volatility in house price measures,” said Martin Beck, chief economic advisor to the EY ITEM Club. “The risk of a sustained correction in house prices hasn’t gone away.”
The annual pace of declines eased to 2.7% last month from 3.1% in March. That put the average value of a home at £260,441 ($325,500), or about 4% below its peak in August.
Supporting the market is a steady decline in mortgage rates since they spiraled to 14-year highs last year. As of last week, the average two- and five-year fixed-rate deals were down to 5.24% and 4.96%, respectively, according to Moneyfacts Group Plc.
“Mortgage interest rates are also likely to act as a headwind,” Gardner said. “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.”
The figures chime with readings from other surveys indicating signs of strength in the housing market. Halifax has reported that prices based on its loan book have been rising for three months, reversing some of the decline it showed at the end of 2022.
Property surveyors for the first time in a year are anticipating sales will increase, and their outlook for prices is at the strongest it’s been since September, according to the Royal Institution for Chartered Surveyors.
What Bloomberg Economics Says …
“There are signs the housing market is stabilizing after the most prolonged period of successive monthly declines in the UK Nationwide house price index since the global financial crisis ended. A shortage of properties for sale may be supporting prices during the busier period in spring. Yet the drop in real incomes and the fastest pace of global policy tightening since the 1980s means an adjustment in house prices is likely to continue.”
—Niraj Shah, Bloomberg Economics. Click for the REACT.
Investors anticipate the BOE’s tightening cycle has further to run, which may weigh on property prices in the months ahead. Money markets are fully pricing in another quarter-point increase in the base rate to 4.5% on May 11 and a peak of almost 5% in September.
“General economic conditions in the year ahead, have both improved markedly in recent months,” Gardner said. “If inflation falls sharply in the second half of the year, as most analysts expect, this would likely further bolster sentiment. This, in turn, would also be likely to support a modest recovery in housing market activity.”
Some forecasters remained more pessimistic given the strains many buyers have coming up with a deposit to buy a home after more than a decade of steady gains.
“With affordability still very stretched by historical standards and the economy likely to succumb to recession, we suspect that we are only partway through the correction,” said Andrew Wishart, senior property economist at Capital Economics.
Read more:
- Shift to Cheaper Homes Holds Answer to Diverging UK House Prices
- London Rents Top £2,500 for First Time as Supply of Homes Drops
- UK Home Sellers Slow Pace of Increase in Property Asking Prices
- UK Property Surveyors See Sales Rise for First Time in Year
- Halifax Says UK House Prices Stabilizing After Drop Last Year
(Updates with comment from fifth paragraph.)
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