House prices fall in April, but it’s not necessarily the beginning of the end (ONS)

• • Average house prices fell 1.9% between March and April, although they were still up 8.9 in a year.
  • The average house price fell back around £5,000 from March, to £250,772. It’s still up £20,000 in a year.
  • House prices in London are still the highest in the UK, but they dropped from an average of £500,000 in March to an average of £492,000 in April, and the annual price rise is just 3.3%.
  • Prices in the North East remained the lowest in the UK, at an average of £ £144,000, but saw the highest annual growth at 16.9%. Prices in the region are now back above their pre-financial-crisis peak.

  ONS House price data for April was released today: https://www.ons.gov.uk/releases/ukhousepriceindexapril2021

  Sarah Coles, personal finance analyst, Hargreaves Lansdown:

  “House prices dropped in April, which is bound to unsettle homeowners after almost a year of accelerating price rises. However, this isn’t necessarily the beginning of the end for house price growth, it’s more likely to be a sign of what an arbitrary deadline can do to a market.

  At this stage we’re not expecting this to be the ultimate turning point for the market, but it’s a useful wake-up call for buyers, and a reminder that house prices aren’t a one-way street.

  The small drop in April doesn’t come as an enormous shock. The stamp duty holiday deadline sparked a frenzy, as buyers rushed to complete before the end of March. So much demand focused into a relatively short window created a price bump in March. In April we saw this drop back slightly, as we tend to do after this kind of deadline.

  A change in direction for prices is bound to spark concern among homeowners. However, it’s worth seeing this in context: prices are still up almost 9% in a year, and although it’s the first time price rises have slowed since July last year, it’s also still the second highest annual price rise figure we’ve seen since 2014.

  Major price drops are usually the result of a serious shock to the system: like interest rates rising, unemployment or recession. All of these are possibilities at such an uncertain time, but none of them are expected.

  Despite inflation rising over its 2% target, the Bank of England doesn’t think it will have to raise interest rates, because it expects it to drop naturally as lower prices from spring 2020 fall out of the figures. Meanwhile, it predicts the unemployment rate will peak at 5.5% this autumn – well below previous forecasts – because it thinks the economy will have reopened and recovered by the time the furlough scheme is fully withdrawn at the end of September.

  The big uncertainty is what the Delta variant will do to all these predictions. If it just introduces a four-week delay to the economy fully reopening, it’s unlikely to change much. If more delays or new closures are needed to keep the virus under control, and the government extends support, then house prices could remain protected. However, it feeds into higher unemployment and lower growth, it could mean more forced sales, which could start to bring prices down.

  There’s nothing to frighten the horses in this set of figures, but it’s a handy reminder that prices can go down as well as up, which is worth bearing in mind if you’re buying at the moment, and the current property draught means you have been sucked into a bidding war and are set to pay more than you can afford.”

  

  Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay