Assetz® News - Recovery or relapse

Recovery or relapse

3rd April 2009 |

The property market usually tends to throw up statistics that can be regarded as reliable. Figures showing clear trends such as rising or falling prices, increases or decreases in mortgage lending or other indicators of health tend to be confirmed by the same message being provided consistently by survey after survey, these being repeated month after month and seeing the same conclusions emanating from different sources.

Such has been the case in the past few months, when there has been a clear theme among property market statistics of lower demand, less mortgages and falling prices as the credit crunch and the recession have taken their toll.

For this reason, there has been some excitement over recent figures such as the higher number of sales per agent recorded in February by the National Association of Estate Agents, the Bank of England data showing an increased number of mortgages lent and the Nationwide figures revealing a 0.9 per cent jump in the average house price in March.

One optimistic view was expressed by head of mortgages at price comparison website moneysupermarket.com Louise Cuming, who remarked: "Those waiting for the market to bottom out before making a move may now feel that [the] time has come."

She added: "So news such as this might prove to be the catalyst that gets the wheels of the mortgage industry turning again."

However, Ms Cuming offered words of caution, stating that there is always the possibility such figures may be "anomalous". This reflected similar sentiments from Nationwide's chief economist Fionnuala Earley, who argued that it would require the data in forthcoming months to show further increases before it could confidently be said a new trend had emerged.

Such words may seem wise today, with the Halifax figures for March revealing a somewhat different picture - a 1.9 per cent price decline.

Yet that may not be proof of an anomaly in the Nationwide figures. An underlying trend in the Halifax data is that the rate of decline is lower than it was. In February, for example, prices dropped by 2.3 per cent. Moreover, the three-month decline was 2.7 per cent in the first quarter, rather than the five to six per cent seen in previous three-month periods.

What this could mean is that the figures emerging in the near future will either suggest a price rise or a shrinking rate of decline, with a clearer picture emerging in time.

At the heart of any recovery will be a loosening of credit conditions. For that reason, what may be most significant of all is not the latest house price figures, but evidence of more lending. There may be good reason for hope on this front for property investors and anyone else looking to buy a home, as the Bank of England's credit conditions survey has just reported that "a small net balance of lenders was expecting an increase in overall credit availability over the next three months".

Such a rise may be small, but added to the other positive news, it may just be that a key underlying factor required for the market to get better is starting to improve at last.