House prices remain static for April but signs of growth in mortgage market
It seems from the latest figures that there has been little movement on house prices over the last few months. The Land Registry’s figures revealed a 0. 1% in March, while Nationwide’s house price index for April showed a very slight drop of 0. 1%.
However both sources confirmed that prices now are 0. 9% higher than last year.
The first few months of the year are usually a quiet time for the housing market, but sales normally pick up in the Spring. Since the Land Registry’s figures are taken from completed sales registered in March, they do not necessarily reflect the current state of the market.
Increased number of mortgage approvals since last year
The Nationwide reports that there is increased activity in the mortgage market. Mortgage approvals for house purchases averaged just over 53, 000 per month in the first quarter of 2013, up from an average of 51, 000 per month in 2012. House purchase lending was also up 4% year-on-year in the first two months of the year, boosted by higher levels of lending to first time buyers (which was up 18% at £2bn).
This has no doubt been boosted by policy measures designed to increase the availability and lower the cost of credit. The Bank of England’s Funding for Lending Scheme (FLS) has already helped to drive mortgage rates down towards new all-time lows and has recently been extended to run for another year (to January 2015).
First-time buyers boost the market
Government initiatives to boost the new-build market seem to be working with first-time buyers accounting for 43% of house purchase loans in February.
Nationwide's Chief Economist, Robert Gardner, says:
"… there is some evidence that activity and prices have gained some momentum in recent months.
The three month on three month measure of house prices, which is a smoother measure of the underlying trend, has been in positive territory since October last year. The annual rate of house price growth also remained in positive territory, with prices 0. 9% higher than April 2012.
Similarly, the number of mortgage approvals has edged up from the levels prevailing last year and there are reasons for optimism that activity levels will continue to strengthen in the months ahead. "
Uneven fluctuations in house price across the country
The picture across the country remains very uneven. Yorkshire, East England and the West Midlands all saw rises of about 1% in March. On the other hand prices in both the Northeast and Northwest fell, by 1. 8% and 2. 5% respectively. And even the Southeast and Southwest saw slight falls, according to the land registry’s figures.
As ever, London home prices still continue to outstrip other regions, with an increase of 2. 5% for March. This brings the average price for homes in the capital to £374, 568.
Within this region individual London Boroughs show quite surprising variations. For instance, although prices in Hammersmith & Fulham rose by 1. 9% in March, this rate of increase was matched in Barking and Dagenham in East London. And while Kensington & Chelsea saw prices rise by 1. 7% this was nearly matched by a 1. 6% rise in Redbridge, another East London borough.
But of course a rise of 1. 7% in Kensington & Chelsea is comparatively modest if one notes that the average price of homes in that area is currently £1, 104, 770, according to the land registry.
While the economy is showing some signs of growth in the first three months of 2013, it is generally agreed that progress is likely to be gradual. The unemployment rate remains high, and wage growth is failing to keep up with the rising cost of living.
Many people in their twenties and thirties now find it difficult to buy a home, or are reluctant to take on a mortgage with the current level of uncertainty over the economic outlook. 'Generation rent' looks set to be around for some time.
This is highlighted by the government’s housing survey for 2012, which found that while the private rented sector is now at its highest level since the early 1990s, homeowners aged under 35 now only constitute 10% of all owner-occupiers.
It is much too early to see what effect the Help to Buy scheme introduced in the budget is having. This scheme aims to boost the new homes market by giving buyers equity loans of up to 20% of a property’s value, to top-up an ordinary mortgage. All homebuyers, not just first-time buyers, may be able to obtain a loan.