Last summer’s housing rally took place during a time when secured credit was still being cut and economic conditions were weak. This time however, the second phase of the housing recovery will be underpinned by modest increases in mortgage lending – albeit still below credit crunch levels.
Housing transactions suffered from modest falls as the extended Bank Holiday weekends reduced the number of sales. The Bank of England reported that the number of approvals declined from 47,600 in March to 45,166 in April.
Nevertheless, a steady number of buyer enquiries and a pick up in viewings – supported by the unusually good weather in April – has improved sales expectations for the immediate future.
House price falls have begun to stabilise although the future remains uncertain as the mortgage market remains in turmoil. Higher sales to stock ratios indicate that the market has tightened modestly – sales now account for roughly a quarter of unsold stock, which is still lower than the long-run average of around a third.
Only two out of seven national house price indices are reporting falls in house prices over the month. This month’s Poll of Polls confirms that prices stabilized over May – ending seven consecutive months of house price falls since September 2010.
Robert Bartlett, Chesterton Humberts’ CEO, comments:
“The Poll of Poll results this month are encouraging, with house prices holding steady for the first time in seven months. While mortgage rates are lower than before the credit crunch, households are still being squeezed on three fronts: the continuing lack of access to credit, slow wage growth and higher inflation in the commodities sectors, which have kept confidence low and indicate a difficult year ahead for the consumer. The slight improvement in mortgage availability last month has helped to steady house prices and demonstrates how this lack of funds acts as a stranglehold on the market.
“The announcement from the BOE that interest rates are likely to be held at 0.5% is very welcome news indeed for the UK economy. Most inflationary factors currently affecting the UK are beyond the scope of the Bank of England to resolve and a rise in the UK base rate would have little impact on curbing inflation. Any rate rise currently would have a significant negative impact on the fragile economic recovery.
“The outlook for the UK housing market remains fragile and varied. Whilst London continues to perform well it is a very different story in the regions.”
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