07-05-09, UpMyStreet ©

For the first time in well over a year, there has been some positive news surrounding the housing market. In March, Nationwide reported a 0.9% rise in property prices - the first since October 2007. Alongside some more encouraging home sales and mortgage approvals, the media has leapt on the news. But, are we headed for a recovery, or is this just us grasping at straws after months of gloom? We present both sides of the argument - then you decide

• House price falls are slowing: The Halifax and Land Registry both showed more encouraging figures for March/April (both down just 0.4%). These figures were received positively by industry insiders, such as PropertyIndex.com’s Lee Bramzell: "...with a healthy dose of market activity and even competition between buyers in some areas, it is not unreasonable to suggest that a narrow shaft of sunlight is emerging."
  
  
• Home swappers are rising: Adverts for home swaps have gone up 32% according to classified website Viva Street. Home swapping could be an attractive choice for buyers in a stagnant market, and could potentially be skewing official sales figures as home swaps go undetected.
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• House sales are up: One of the greatest indicators of the state of the housing market, house sales, were up 40% in March on February, according to HM Revenue & Customs. With property prices seeming to rally in March, and then fall back marginally the next month, sales figures for April should make interesting reading.
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• Quarterly falls are slowing: Newly released Halifax figures show prices from January - March 09 fell 3.3%, whereas in the two last quarters of 2008 they fell 5-6%. This suggests the long term picture could be more positive, than just looking month by month.
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• Agents are showing confidence: On the other side of the fence, property portal Rightmove has revealed that estate agents – who have been on cost-cutting missions across the board for the last year – are spending more on online promotions.
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• First time buyers have more confidence: 57% of first-time buyers think that house prices will increase in the next year, and 69% think that now is a good time to buy, according to a Rightmove survey. Additionally, the average first time buyer has £31,650 saved for a deposit – around 20% of the average UK house price.
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• Quick sales and stabilising prices: A shortage of homes on the market in London, has led to a glut of quick sales and the stabilisation of prices in some areas, say agents Cluttons. According to James Hyman, Residential Sales partner, “The market has improved considerably throughout April with demand in Central London exceeding current stock levels, as the banks are offering more flexible loan to values and buyers are using their non-interest earning savings to invest in property”. This pattern could extend to areas where demand is high for properties.

No – there’s still a way to go

• Mortgage lending is still critically low: Mortgage lending is currently down 50% on last year, and despite positivity in the housing market, there are very few buyers who can move without a mortgage.
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• Mortgage approval rises are deceptive: While mortgage approvals made a huge jump between January and February of 18%, between February and March they only rose 4%, according to the Bank of England. “...approvals remain at a level consistent with further sharp falls in house prices”, warns Jonathan Loynes of Capital Economics.
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• First time buyers: Despite incredibly low interest rates, the average first-time buyer still needs to put down a 25% deposit, according to the Council of Mortgage Lenders. Lenders are attempting to attract first-time buyers with incentives such as paying for council tax, but these moves may not be much help. For many lenders it is the long term security of a decent mortgage package that is needed.
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• Big falls are still predicted for 2009: At the beginning of the year we documented just a few of the many house price predictions being made for 2009 (link). Now, four months in, despite some positive signs, these predictions aren’t being revised. For example, Savills predicted an 11% drop, and Capital Economics a 20% drop, with neither budging on these numbers. Capital Economics believe that though there has been some recovery, this has been tiny compared with the drops in 2008, and that there is still a way to go.

What do you think?

Do you think the housing market is recovering? Or is this just misplaced optimism? Send us your views, and we'll publish them in the next newsletter.