Prices stabilising, with large regional variations
» The level of house prices in the UK is still moving sideways (chart 1), and over the past few months growth has stabilised on a y-o-y basis (chart 2). The Nationwide house price index was down 1% m-o-m in March, but the Halifax index was up 2.2% m-o-m. Both asking-price surveys showed positive momentum, with the Hometrack index up 0.2% in March, and the April Rightmove price survey up 2.9% m-o-m (chart 5).
» The RICS survey improved in March by slightly more than consensus forecasts to its highest reading since June 2010, although it still showed a net balance of 10% of surveyors reporting falling prices (chart 3). Price expectations for three and 12 months ahead ticked down, suggesting that surveyors also think some of the recent optimism was driven by the end of the stamp duty tax break for first-time buyers on 23 March.
» The London housing market remains the strongest (chart 16), although new-buyer enquiries in the West of England and Wales have grown for the past two months (chart 18). Still, the average house price in London is GBP282,502 (taking the mean of the Halifax and Nationwide surveys), 74% higher than the national average of GBP162,409. Activity also stronger, but mortgage approvals disappoint
» March mortgage approvals were a lot weaker than expected, suggesting that the boost from the stamp duty tax holiday has already run its course (chart 10).
» But Homebuilders are reporting signs of site reservations and prices picking up (chart 13). The March construction PMI survey also suggested a strong increase in orders, though it was mainly driven by new construction on commercial and civil engineering projects rather than private housing (chart 38).
Tight credit conditions mean a sustained recovery is unlikely
» The Bank of England's Q1 2012 Credit Conditions Survey showed that demand for mortgages is increasing, but lenders are actually tightening their lending criteria (chart 24), resulting in more rejections (chart 25).
» There was also significant widening in spreads on mortgage rates (chart 23), which may be because of financial market conditions taking another turn for the worse. Bank CDS spreads are widening again (chart 31), and interbank rates are still elevated (chart 29).
» And various macroeconomic factors are restraining demand. The labour market and consumer confidence remain weak. Nominal wages are still growing at a slower rate than inflation, squeezing real incomes (chart 33). Unemployment fears have eased since the start of the year, but workers are more worried about the state of their finances than before (chart 39).