UK house prices rise for first time in eight months

HOUSE prices in the UK rose for the first time in eight months in April, halting for now the worst slump in 14 years, one of the country’s biggest mortgage lenders said.

Nationwide Building Society said its measure of home values rose 0.5 per cent last month, after a 0.7 per cent drop in March. This was the first increase since August.

Economists had expected declines to continue, and the March figure was not quite as bleak as previously estimated.

“There were tentative signs of a recovery,” Nationwide’s chief economist Robert Gardner said on Tuesday (May 2). “In recent months, industry data on mortgage applications point to signs of a pickup.”

The figures open the prospect that house prices may not slump by 10 per cent or more, as economists have warned. Soaring inflation and interest rates have strained affordability of new homes, but a lack of supply of properties coming to market has helped keep prices buoyant.

For months, Nationwide’s figures have shown sharper declines in the market than rival mortgage lender Halifax. Analysts watch those two surveys, based on lending in each of the bank’s books, for a signal for where the broader housing market is headed in official Land Registry statistics.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

“One month does not make a trend and, given the degree of volatility in house price measures,” said Martin Beck, chief economic advisor to the EY Item Club. “The risk of a sustained correction in house prices hasn’t gone away.”  

The annual pace of declines eased to 2.7 per cent last month from 3.1 per cent in March. That puts the average value of a home at £260,441 (S$434,256), or about 4 per cent below its peak in August.

Supporting the market is a steady decline in mortgage rates after they spiralled to 14-year highs last year. Moneyfacts Group said that as of last week, the average two-year and five-year fixed-rate deals were down to 5.24 per cent and 4.96 per cent, respectively.

“Mortgage interest rates are also likely to act as a headwind,” Nationwide’s Gardner said. “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.”

The figures chime with readings from other surveys indicating signs of strength in the housing market. Halifax has reported that prices based on its loan book have been rising for three months, reversing some of the decline it showed at the end of 2022. 

For the first time in a year, property surveyors are anticipating sales will increase, and their outlook for prices is at the strongest it has been since September, according to the Royal Institution for Chartered Surveyors.

Bloomberg Economics’ Niraj Shah said: “There are signs the housing market is stabilising after the most prolonged period of successive monthly declines in the UK Nationwide house price index since the global financial crisis ended.

“A shortage of properties for sale may be supporting prices during the busier period in spring. Yet, the drop in real incomes and the fastest pace of global policy tightening since the 1980s means an adjustment in house prices is likely to continue.”

Investors anticipate the Bank of England’s tightening cycle has further to run, which may weigh on property prices in the months ahead. Money markets are fully pricing in another quarter-point increase in the base rate to 4.5 per cent on May 11 and a peak of almost 5 per cent in September.

“General economic conditions in the year ahead, have both improved markedly in recent months,” Gardner said.

“If inflation falls sharply in the second half of the year, as most analysts expect, this would likely further bolster sentiment. This, in turn, would also be likely to support a modest recovery in housing market activity.” BLOOMBERG