House prices fell by 0.4% in April, according to Nationwide, which puts the average price of a UK property at £151,861 down 15% from 12 months ago. The three-month-on-three month rate of decline has improved from -4.1% in March to -3.1% in April, indicating an overall upward trend for the year so far.
The stamp duty extension in the Budget was welcomed by the lender, who says that since prices have come down, a typical first-time-buyer house price is now below the £175,000 threshold everywhere but London and the Home Counties.
Stamp duty holidays notwithstanding Nationwide still appears to think that not enough has happened to stimulate significant activity in the housing market. Chief Economist Fionnuala Earley said: ‘For the most part buyers will remain cautious as long as they think that prices will continue to fall. While affordability is indeed more favourable and there does seem to be some cautious optimism from some quarters, it is still far too soon to say that this is the start of a solid revival in the market.’
The report is also keen to point out that the housing market is very sensitive to income, and with recession continuing and unemployment increasing it’s still going to be some time before the market improves, although the signs should be good when it does. Ms Earley commented: ‘The correction in house prices and improved affordability conditions provide a good grounding for the market once domestic and global economic conditions once again become more favourable.’
Other experts are careful to point out this report indicates there is still a very long way to go before recovery: ‘The recent improvement in both buyer sentiment and the wider economic outlook may well help to slow the rate of house price falls over the next few months. But we would be wary of interpreting that as a sign that house prices are approaching their floor. In our view, that is unlikely to happen until mortgage credit becomes much more freely available and the recession has run its course – something we don’t expect to see before the second half of next year,’ commented Ed Stansfield from Capital Economics.
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