House prices positive, but one swallow doesn’t make a summer

Sarah Coles, Head of personal finance at Hargreaves Lansdown, comments on the publication of the Nationwide House Price Index for April 2023, showing house prices positive, but one swallow doesn’t make a summer.

Key points from publication:

• • House prices rose 0.5% in a month – after seven consecutive months of falls.
  • On an annual basis, house prices are down 2.7% in the year to April – a slight recovery from 3.1% last month.
  • The average house price is £260,441. This is still almost 5% below August’s peak (£273,751).

Sarah Coles says:

“House prices have recovered very slightly, with the spring bump pushing them into positive territory after sliding for seven months.

“It’s an encouraging sign for the market, but one swallow doesn’t make a summer.

“The uptick in prices was foreshadowed in mortgage approval data, when approvals for new purchases started to pick up very slightly in February, so we were expecting more sales in the spring. It owes a fair amount to renewed confidence that the horrors of inflation could be coming to an end, and that mortgage rates will continue to fall.

“The GfK confidence index shows that people’s confidence in their own finances has picked up slightly.

“If inflation drops back fairly swiftly after April this may well creep higher as people can see light at the end of the tunnel. Meanwhile, mortgage rates have continued trending downwards.

“Moneyfacts figures show that averages wavered slightly in the wake of the surprise inflationary rise in March and the subsequent rate hike, but more recently they have started inching south again.

“However, there are no guarantees, and while this can inspire hope among buyers, it can’t secure any certainty, so it’s too early to call the bottom.

“While confidence is moving in the right direction, it’s still incredibly low by historic standards. Part of the problem is that we don’t know how long it’s going to take for inflation to fall back.

“We’re still expecting it to be much lower by the end of the year, but there’s a reasonable chance that stubbornly high food prices and rising wages will keep it elevated for a few months yet. Even when it does fall, it’s not going to mean a widespread drop in prices: in most cases, things are just going to get more expensive less quickly.

“And because our wages have fallen so far short of price rises, it’s going to take time for our spending power to catch up – so we’re still poorer than we were before inflation kicked off.

“We know from the RICS surveys that buyer demand was still falling in March, and that the agreed prices on sales were still lower, so when this feeds through into the official data, we may still see a good deal of weakness in the figures.

“So while these figures may be a comfort to those who are in the process of buying a house, it doesn’t pay to get too comfortable.

“It’s still well worth pushing for a good deal, to build yourself a cushion if prices remain soft in the months ahead.”

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay