House Prices April 2012

by Mark Johnston

According to the Halifax house prices fell in April at their fastest rate for 20 months, knocking nearly £4,000 off the value of the average property in Britain. House price therefore are now 0.9% lower than in April 2011.

The Nationwide house price index found that the price of a typical home fell by 0.2%, taking the average UK house price to around £164,134. On an annual basis, prices are now below their level a year ago.

Nationwide chief economist, Robert Gardner, said “the drop in April is the fourth time in 5 months that prices have declined”.

Howard Archer, chief economist at HIS Global Insight also added that “house prices in April were 3.5% below their June 2010 peak and 11.8% below their October 2007 record high”.

Some experts believe that the ending of the stamp duty holiday for first time buyers in late March appear to have boosted home sales early on in the year, but it has also probably contributed to the volatility in house prices in the last few months.

The Bank of England figures showed that the number of mortgage approvals for house purchases rose by 1.5% in March but they still remained firmly below the previous 6 month average.

So it does seem that borrowers are facing tougher hurdles to getting a mortgage now and availability is expected to decrease in the coming months as lenders further tighten their borrowing criteria.

Martin Ellis, Halifax’s housing economist, suggested that “despite the slight improvement in the underlying trend in recent months house prices continue to lack any real direction, with the current UK average price little different to where it was at the end of 2011”.

In light of the housing market woes the Halifax began measuring consumer confidence around a year ago and the tracker recently reported that 4 in 10 people felt that house prices will rise in the coming year, which is double the amount who believes prices will fall. The Halifax states that this is the most positive reading since they started tracking.

However, professional economists continue to believe direction in house prices is flat or downwards and believe that house prices will drift lower over the coming months. This belief is reinforced by the Nationwide reporting that house prices fell by 0.2%.

Housing market activity is very low at the moment and the economic fundamentals currently look worrying overall for the market, with unemployment high and likely to rise further, earnings growth muted and the outlook uncertain.

Nicholas Ayres, from buying agents Home Fusion said that “house prices are being dragged down by the full weight of consumer caution and economic uncertainty and the nationwide are or thereabouts when they say prices will stagnate over the course of the next year” he also added “my feeling is that this is the most positive scenario”.

The challenging economic backdrop does suggest that a significant acceleration in prices or activity is unlikely in the near term and house prices are expected to fall by around 3% by the end of 2012.

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