UK house price rise show ‘tentative signs of recovery’
A recent modest rise in UK house prices is evidence of ‘tentative signs of a recovery’ according to the Chief Economist at Nationwide.
After a prolonged period of decline lasting seven months, Nationwide say the average house price across the UK rose by 0.5% in April, raising the average price by £3,289 to £260,411. The average price remains down on the same month in 2022 and still languish 4% below the most recent peak in August last year.
However, the 3.1% drop experienced in March has come to a halt and inspired some industry experts to anticipate more good news as we head into the summer.
Mortgage Applications on the Rise
One of the major issues concerning the UK housing sector over the last year or so is the decline in mortgages approved for house purchase. They were still 40% lower in February this year then they were twelve months previously, according to Bank of England data. Recently though, industry data shows that numbers of mortgage applications are increasing to indicate early signs of recovery.
Nationwide’s Chief Economist Robert Gardner drew parallels with the uptick in mortgage applications, saying: “This chimes with recent shifts in consumer sentiment. 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.”
Gardner also highlighted the potential for an additional boost to confidence in the sector should inflation ‘fall sharply in the second half of the year’. The Bank of England along with many analysts are indeed expecting such a sharp fall, which will be further boosted by job market conditions remaining strong. Gardner also pointed out that unemployment levels have remained relatively low in spite of the economic slowdown, further supporting a modest recovery in the housing market activity of the UK.
Gardner also warned that: “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.”
Effects of Mini-Budget Disaster ‘Fading’
The effects of the calamitous mini-budget during the short-lived term of Liz Truss as Prime Minister last year have started to fade, according to some experts. Mortgage interest rates are much lower than they were in the immediate aftermath of 2022’s mini-budget, though they are still more than twice the amount they were just one year ago.
This is primarily down to the Bank of England increasing interest rates at a much faster pace than usual in an attempt to curb inflation of above 10%. So far there have been 11 interest rate increases to bring the level up to 4.25%, with another expected rise set to bump the rate up to 4.5%.
Speaking to the Guardian newspaper, the head of UK residential research at property firm Knight Frank, Tom Bill, confirmed that he believed the ‘reverberations from the mini-budget’ were beginning to fade: “Price declines are bottoming out and many buyers have accepted the new normal for mortgage rates as stability returns to the lending market.
“Boosted by savings accumulated during the pandemic, record levels of housing equity and a strong jobs market, activity has been solid without being spectacular this year. Supply is rising, which will increase downwards pressure on prices but the market is returning to Earth rather than falling off a cliff.”
Halifax Report Mixed Growth Patterns Across UK
Despite the relatively positive outlook of the last couple of months, a recent Halifax report confirmed that annual house price growth is still at its lowest point for over a decade.
The report also identified the four regions of southern England as having the slowest annual growth, while the West Midlands experienced the strongest annual growth. Despite the lack of significant growth, buyers still face the most expensive average house prices in Greater London and eastern England, as well as in the south-east and south-west.
Meanwhile, the 3.1% growth posted by the West Midlands took the average house price there to £249,554. Both Scotland and Northern Ireland also witnessed impressive growth, with Wales experiencing just 1% growth.
House Buying Opportunities
While properties remain relatively expensive in London and the southern regions of England, the potential for property investment opportunities remains strong as the ‘tentative signs of recovery’ identified by Nationwide point to a brighter future.
Properties purchased now have the potential to significantly appreciate as the UK housing market continues its recovery from an incredibly difficult period that incorporated the Covid-19 pandemic and the mini-budget.
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