House prices up but property market to remain ‘sluggish’

House prices rose 0.5% in March, but the unexpected increase is unlikely to mark the beginning of a strong upturn, according to a new report by Nationwide.

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by Victoria Bischoff on Mar 31, 2011 at 08:53

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House prices up but property market to remain ‘sluggish’

House prices rose 0.5% in March, but the unexpected increase is unlikely to mark the beginning of a strong upturn, according to a new report by Nationwide.

House prices have now risen in three out of the past fourth months and are 0.1% higher than in March last year. The three month on three month measure of house prices, which is considered a better measure of the underlying trend, meanwhile showed a modest rise of 0.6% in rise.

Official Land Registry figures released earlier this week however show that house prices fell 0.8% in February, the fifth month on month drop in six months, and are down 1.7% over the past year.

Robert Gardner, Nationwide’s chief economist, said: ‘The outlook remains uncertain, but all things considered, this is unlikely to mark the beginning of a strong upturn in prices’.

‘With the economic recovery expected to remain sluggish, the most likely outcome is that the property market will follow suit, with low transaction levels and prices moving sideways or modestly lower through 2011,' he said.

Gardner added that while demand is likely remain ‘fairly soft’, a rapid increase in the supply of property also appears unlikely.

‘Low interest rates and a stabilisation in labour market conditions have prevented a rise in forced selling, and the subdued market outlook is deterring many sellers from entering the market,’ Gardner explained.

Nicholas Ayre, a director of UK buying agents, Home Fusion, meanwhile said: ‘Never has a monthly price rise been less representative of the state of the property market’.

‘Given the state of demand, the recent trend of price rises the Nationwide has observed is likely to be short-lived,’ he said.

‘The timing and management of interest rate rises will be pivotal. Too many rises too soon and the market is likely to come under extreme pressure’, Ayre added.

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8 comments so far. Why not have your say?

What a pointless article - house prices are UP say nationwide. Oh but theyre down according to LR. Or maybe thay havent changed then.....or something

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This article is drivel. House prices are still much too high and need to come down. Sellers will not be happy about this which explains why asking prices are still way above what most people can afford and why houses are not selling.

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I always rely on the Land Registry figures - they may be historic by one month but I'm convinced they are more accurate than many we see banded about.

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Mr Hedley - It's like comparing apples with elephants. Nationwide probably use asking prices or mortgage acceptance figures. At least the Land Registry figures are what the houses actually sold for. Why does anyone give any credence (or publicity) to any other figures?

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"Houses rose by 0.5% in March ..."

Rubbish!

What the report should say is that those houses sold in March for which Nationwide advanced mortgages, rose by 0.5% compared with their previous month's figure. It should not then extrapolate that across every house in Britain and conclude that ALL houses rose by that percentage.

Additionally, If lower priced properties are not selling because FTB can't get mortgages, then those lower priced houses are not being included in the NW figure. Similarly, houses which are sold at auction, many of which are going for well below their original asking/selling prices, are not included, so that the reported NW figure is being skewed upwards and not reflecting reality.

Finally, take a situation where in a four household chain say, three of the buyers are trading up, whilst the top of the chain is trading down and not therefore requiring a mortgage. The three trading up will be included in the NW figures, but the one not requiring a mortgage, and buying a cheaper property, will not be counted. Ergo, the figures show that "prices are going up".

The reality is, that with such a low number of transactions currently, and many of the cheaper properties not being included in the calculation, a false higher figure must result. As others have said, discount the Haliwide figures for the moment and accept the Land Registry figures as being closer to the truth.

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Majic, spot on.

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Majic, well articulated- It seems to me that the lending institutions want to talk up the property market. I know here in the south-east, a lot people seem to think the only place to invest is property.

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alan franklin

Apr 05, 2011 at 14:05

Here on the Surrey/Hants borders prices are up on the 2008 figures. Look on Rightmove and you will see loads of properties marked "sold."

I went to look at two properties last week and had competing potential purchasers looking around the same day. The market is not fantastic but is far from dead and prices are not falling round here, that's for sure.

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