Faint signs of housing market recovery

30 March 2009

Hometrack has become the latest surveyor of the housing market to pick up faint signs of a recovery.

The market intelligence company’s monthly housing survey found that prices fell 0.6% over March – the lowest monthly decline for 10 months. The survey also found that the average time a property spends on the market has fallen to 11.3 weeks from 12 weeks - suggesting that people are either taking their homes off the market or selling more quickly than in previous months.

Asking prices also seem to be under less pressure; Hometrack reports that sellers are achieving 88.8% of the price they ask for their homes compared with 88.3% in February. There was also a 19% increase in the number of sales agreed and a further 8.5% increase in new buyer registrations.

However, Richard Donnell, director of research at Hometrack, is cautious about reading too much good news into the figures.

He says: “An increase in the volume of sales agreed in the last month, albeit off record low levels, and buyers continuing to register has led to a small but growing sense of optimism among estate agents. While market conditions remain extremely tough, and the economic outlook is far from rosy, the net result is that agents are currently marking down prices less aggressively than they were in the autumn when the turmoil in world markets was at its peak.”

And he adds that this situation could well reverse in the near term because of weakened consumer confidence, low levels of mortgage lending and the ongoing recession.

The scale of problems facing the market is clearly shown when considering Hometrack's year-on-year figures – prices in March were 10.3% lower than they were in March 2008, compared to a 10% fall in February and a 9.3% decline in January.

Sales volumes, while slowly picking up, are still extremely low across the country by historic standards. Donnell suggests that March's figures reflect the traditional higher levels of activity in spring months as well as “pent up demand”. 

Meanwhile, Bank of England figures show a rise in the number of mortgage approvals and suggest that housing market activity may finally have turned a corner. Loans approved for buyers increased from 32,000 to 38,000 in February - their highest level since last May.

Vicky Redwood, UK economist at Capital Economics, says this might suggest that the pick-up in new buyer enquiries is feeding through into actual activity.

But she warns: "This is clearly quite promising - however, approvals have a long way to go before they get to levels that are no longer consistent with falling house prices. In fact, they need broadly to double."

And despite the increased levels of lending, housing transactions remain weak.

Paul Samter, economist at the Council for Mortgage Lenders, says: "We will need to see a few more months’ figures before we can say with any confidence that market conditions are showing a fundamental improvement. Transactions remain historically very weak, and this makes it harder than usual to adjust the figures for the normal upturn that happens in the spring."

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