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Is the housing market’s spring boost a corner turned, or ‘just a blip in a downward trend’?

Surprisingly bright numbers from the nation's big mortgage lenders have caught analysts on the hop — but is the property market growing again, or is there more to it? Annabel Dixon takes a look in this week's Property Talk.

Spring seems to have finally arrived and about time too. And it’s not just the weather that appears to be improving. Monthly house prices are too, for the first time since last August, according to Nationwide’s latest house price index.

House prices climbed by 0.5% in April, after seven long months of consecutive falls. Meanwhile, the annual rate of house price growth rallied last month to -2.7% from -3.1% in March. It leaves prices 4% below their peak in August 2022.

Commenting on the figures, Nationwide’s chief economist, Robert Gardner, says there were ‘tentative signs of a recovery’.

In reporting a monthly rise, Nationwide follows in the footsteps of fellow lender Halifax, which has been – relatively – more upbeat recently. Halifax has revealed a string of monthly house price increases this year. It just goes to show how confusing interpreting house price indices can be.

The question on everyone’s lips now is: is this uplift a one-off or the sign of a broader trend?

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‘The worst appears to be behind us’

Martin Beck, chief economic advisor to the EY ITEM Club, cuts to the chase: ‘One month does not make a trend and, given the degree of volatility in house price measures, April’s rise in the Nationwide gauge could prove short-lived. But it’s consistent with other signs that weakness in the market may have bottomed out.’

And encouraging signs there are. The housing market continues to rebalance as buyer interest in homes for sale hit its highest level so far this year, after Easter, according to Zoopla.

‘Housing market conditions continue to improve as buyers return to the market and more sales are agreed,’ says Richard Donnell, executive director at the property portal.

‘House prices are posting very modest falls and are expected to be just 1% lower by the end of the year. The worst of the pricing adjustment appears to be behind us.’

Green shoots, potential headwinds

Market commentators point to an uptick in consumer confidence and rising mortgage approvals.

Gardner says: ‘If inflation falls sharply in the second half of the year, as most analysts expect, this would likely further bolster sentiment, especially if labour market conditions remain strong.’

But despite the green shoots, there are still potential headwinds that could dash hopes for a longer-term upward trajectory in house prices. At least, according to some.

Gardner warns that ‘any upturn is likely to remain fairly pedestrian’ because of struggling household finances and higher mortgage rates.

Over at EY ITEM Club, Beck says that house prices ‘remain very high on most measures of affordability’.

‘Borrowing costs could increase further if, as the EY ITEM Club expects, the Bank of England raises interest rates again this month,’ he explains. ‘And while the prospect of rapidly falling inflation should reduce financial strains facing households, real incomes are likely to still fall over most of this year. Therefore, the risk of a sustained correction in house prices hasn’t gone away.’

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, argues in The Times that last month’s bounce is ‘probably just a blip away from its downward trend’. Elsewhere, in the Financial Times, he says he ‘expected the housing market to bottom out only at the end of this year’.

For now, all eyes are on the Bank of England, with the next interest rate decision set for Thursday, May 11. Given the constant stream of surprises we seem to face these days, who knows where that may land.