House price slide is short and shallow so far: soft landing may be in sight
Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on the publication of the ONS House Price data and Land Registry House Price Index for March 2023, showing price slide is short and shallow so far: soft landing may be in sight.
Key points from publications:
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- House prices fell for the fourth consecutive month – with prices down 0.9% between February and March.
- Average house prices were up 4.1% in the year to March – down from 5.5% a month earlier.
- The average house price hit £285,000: £11,000 higher than a year earlier, but £8,000 below November’s peak.
- Within the figures it was notable that London house prices are up just 1.5% in a year – and that new build property is up 11.1% in a year.
Sarah Coles says:
“House prices fell again in March, but so far, the slide has been short and shallow, and there’s every chance we could be heading for a soft landing.
“The immediate future could be bumpy. RICS figures continue to show a dearth of demand, with the number of new buyers falling in both March and April. It said house sales were down and prices continued to fall.
“We definitely can’t rule out more bad news in the coming months.
“However, there have been more positive signs from elsewhere in the market.
“The Bank of England said mortgages approved for new purchases rose significantly in March – which means more potential purchases this summer.
“The Zoopla index was even more upbeat, showing demand after the Easter break was up 14% from 2019 – although still down from the levels we saw last year.
“The strength in the market owes a great deal to the labour market. Unemployment has been at real lows, and we haven’t yet seen much movement.
“The Bank of England does expect this to rise to 4.4% in 2024, but this is still relatively low by historic standards. As long as people have jobs, we shouldn’t see a big rise in forced sales.
“There’s also the fact that for existing homeowners, millions still haven’t seen their interest rate increase, because they’re still on a fixed rate deal.
“If rates drop back before they have to remortgage, they could have dodged a bullet.
“Of course, an awful lot depends on when mortgage rates drop, and how far they go.
“The future of rates remains the biggest potential risk to the market. Right now, the market is pricing in one more rise to 4.75%.
“The drop in inflation in April back to single digits is unlikely to disrupt that view.
“However, with core inflation rising in April to 6.8%, there’s still a risk that the Bank of England will struggle to bring inflation down.
“If rates peak higher, we could see it take a more serious toll on the market. This is a big ‘if’, though, and at the moment it’s seen as a risk rather than a probability.
“As ever there are some major regional differences in the figures, with growth in London down to just 1.5% over the year.
“There’s a real chance prices there could turn negative before they pick up again.
“Meanwhile, new build property continues to romp ahead of the market.
“And while this may be good news for housebuilders, there may be warning signs for anyone who pays that new build premium and then moves on fairly quickly.
“The premium will have been lost, and there’s every chance house price rises won’t have made up for it.”
Kindly shared by Hargreaves Lansdown
Main article photo courtesy of Pixabay
