"There were tentative signs of a recovery with prices rising by 0.5% during the month"
The average UK house price was £260,441 in April, up 0.5% from the £257,122 recorded in March, the Nationwide Building Society has reported.
The annual rate of house price growth remained negative at -2.7% in April, but was still higher than the -3.1% posted in March.
April also saw a recovery in house price growth after seven months of consecutive falls.
“While annual house price growth remained negative in April at -2.7%, there were tentative signs of a recovery with prices rising by 0.5% during the month,” Robert Gardner, chief economist at Nationwide Building Society, commented. “April’s monthly increase follows seven consecutive declines and leaves prices 4% below their August 2022 peak.
“Recent Bank of England data suggests that housing market activity remained subdued in the opening months of 2023, with the number of mortgages approved for house purchase in February nearly 40% below the level prevailing a year ago, and around a third lower than pre-pandemic levels. However, in recent months, industry data on mortgage applications point to signs of a pickup.
“This also chimes with the recent shifts in consumer sentiment. While confidence remains subdued by historic standards, people’s views of their own financial position over the next twelve months, and general economic conditions in the year ahead, have both improved markedly in recent months. 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.”
“This, in turn, would also be likely to support a modest recovery in housing market activity. But any upturn is likely to remain fairly pedestrian, as it will take time for household finances to recover, since average earnings have been failing to keep pace with inflation, and by a wide margin over the last few years.”
Gardner added that mortgage interest rates would likely act as a headwind and while they are well below the highs seen in the wake of the mini budget last year, rates are still more than double the level prevailing a year ago.
“Nevertheless, if gains in nominal incomes remain solid, this, together with weak or declining house prices, will help improve housing affordability over time, especially if mortgage rates continue to trend lower,” he said.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, remarked that the latest Nationwide House Price Index has revealed that house prices are holding up well despite continuing worries about mortgages and inflation.
“Not only are lenders being cautious, buyers are also ensuring they have sufficient resources, not only to cover repayment, improvement and other costs, as well as getting the best property deal they can before taking the plunge,” Leaf explained.
Jonathan Hopper, chief executive of property buying agency Garrington Property Finders, added that while all buyers remain price sensitive, the more pragmatic are taking an increasingly long-term view in their plans rather than agonising over how prices might change over the next month or two.
“Sales volumes are low and there was no spring bounce this year, but supply is slowly improving – helped by the many buy-to-let landlords selling off investment properties which no longer break even following the surge in interest rates,” Hopper said.
“Nevertheless, things are far from back to normal. With inflation still in double digits, the Bank of England may increase interest rates again later this month – and this would push affordability further out of reach for more first-time buyers.
“But at the top end of the market, where buyers tend to be less reliant on mortgage borrowing, business is getting brisker as astute buyers capitalise on softer prices to secure favourable deals that would have been unthinkable a year ago.”
“The outlook for house prices in 2023 was always going to be heavily influenced by consumer confidence, and confidence is returning,” Adam Smith, director at Northampton-based mortgage broker Alfa Mortgages, said.
“People sense that the economy may hold up better than many have predicted, and that is slowly starting to see some green shoots in the property market. That said, there are countless variables at play and one month of growth does not a market make. But in the current climate, you have to take the positives.”
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