House price bounce distorted, warns Nationwide economist
House prices made a surprise bounce of 0.9% last month, according to Nationwide's March House Price Index.
The average UK house price increased to £150,946, up from £147,746 in February - the first increase since October 2007.
But Fionnuala Earley, Nationwide's chief economist, says: “The moderation in the annual rate of fall is somewhat distorted by conditions last year and so it would be unwise to draw strong conclusions from the significant slowdown in the annual rate of fall.
"Equally, while the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached."
She adds: "The Bank of England has already taken strong measures to ease the tensions in economic and financial markets by cutting rates and commencing quantitative easing. However, it will take time for these to work through into the housing market before we can expect a sustained recovery in house prices."
The bounce follows the latest Land Registry House Price Index, which reveals that sales volumes plummeted 59% to an average of 38,830 per month between September and December, according to the Land Registry’s February House Price Index.This compares to 95,679 during the same period in 2007. In December alone, there were 36,341 transactions, 55% less than in December 2007 (81,300).
The index, published last Friday, also reveals that the sale of properties priced between £250,001 and £400,000 suffered the greatest annual decline in sales volumes in December (66%). Properties priced below £50,000 experienced the smallest fall, down 5% to 640.
On a regional basis, the volume of sales of London properties priced between £300,001 and £500,000 suffered the greatest fall of 69%.
Nevertheless, the figures comes as the Bank of England reveals that 37,937 loans were approved for house purchase in February, up from 31,791 in January. This compares with the previous six-month average of 31,495.
Henry Pryor, industry pundit, says: “The number of new properties coming to the market is also markedly down, with only 83,000 new instructions, down from 152,000 in February last year.
“This reduction in supply should help stabilise house prices, but the huge fall in demand illustrated by the reduced number of transactions explains why house prices are still falling fast.”
The Land Registry HPI shows a five-year decline in average property prices, down 2% month-on-month to £153,862 in February and 16.5% year-on-year.
Regionally, the West Midlands saw the sharpest annual price fall of 17.7% to £128,021.
The highest monthly fall was experienced in the North West - 4.1% down to £114,622 - while the lowest falls were seen in the South West and Yorkshire and the Humber, where prices fell 1% to £163,337 and £125,192, respectively.
Prices in Rochdale fell the furthest between January and February, down 5.1% to £99,403, as well as year-on-year, down 18.5%.
Nigel Adamson, partner at Adamson Estate Agents in Rochdale, says: “I’m not surprised. Rochdale has probably seen a later fall in prices, as it did increases, so it’s an expected correction.”
He adds that there is downward pressure on prices in the area, with the average price of his stock down around 15% year-on-year.
Properties on his book are currently priced between £60,000 and £1.3m.
The index also reveals that prices in London fell 1.9% to £298,563 month-on-month and 15.6% during the year, which is broadly in line with the whole of England and Wales (16.5%).
Within London, prices in Camden suffered the greatest monthly fall of 4.3% to £454,503.
Separately, Nationwide's House Price Index, out today, reveals that prices in in Q4 2008 declined a monthly and annual decline of 4.2% and 16.5% respectively, to £149,709.
Meanwhile, Hometrack’s House Price Survey for March reveals a 0.6% decline in house prices in the month, which it claims to be the lowest monthly decline for 10 months.
Prices fell 10.3% year-on-year, with the firm predicting that prices will continue to be under downward pressure for some time due to declining demand.
But the average time properties spent on the market in March fell to 11.3 weeks, down from 12 weeks in February.
Meanwhile, the proportion of properties achieving their asking price rose for the first time in two years to 88.8%, up from 88.3%.
Agreed sales and new buyer registrations were also up by 19% and 8.5%, respectively, according to the survey, which was based on 5,900 responses from 1802 agents and surveyors across 2,300 postcodes in England and Wales.