David Prosser: House price uncertainty not over yet

Outlook First the stock market and now property is going on a bit of a run too. It's difficult to remember when we had two such bullish reports on housing – yesterday's mortgage approval figures and Tuesday's house price rises from the Land Registry – in the space of just two days.

Crisis over then? Well, yes, if you mean we can finally say with some certainty that the month-by-month collapse in house prices we have seen over the past 18 months is now levelling out. But don't make the mistake of thinking that anything like normal service is resuming or that the house price falls we have seen – about 14 per cent on average according to the Land Registry – will be recouped in the near future.

Just look at those mortgage approval figures, optimistically seized on for the fact that lenders agreed more home loans in June than in any month since April 2008. True enough, but the total number of approvals last month, at 47,500 or so, was still only half the average monthly figure seen since 1993. And most housing analysts believe a figure of 70,000 is necessary for house prices to start rising.

All the evidence is that demand remains muted, partly as potential buyers are not yet convinced that bottom of the market has been reached, but also because unemployment – the reality or the fear of it – is making people more cautious.

Moreover, buyers who do want to make a purchase can't necessarily get the credit they need to do so. The increase in approvals partly reflects the huge pressure mortgage providers have come under to lend more, but the Royal Institute of Chartered Surveyors warns that even once sales have been agreed, 10 per cent are falling through because the buyer can't get a home loan.

For those who do get the go-ahead, meanwhile, mortgage costs are now beginning to rise. The price of fixed-rate deals, in particular, has spiked upwards over the past month, with the wholesale money markets now pricing in expectations of higher interest rates in the future. Variable rates are cheaper, but not so many borrowers want this type of mortgage these uncertain times.

Mortgage affordability, in other words, is set to rise from its current low level, which is unfortunate given that wage inflation is now so low for so many. And remember that mortgage affordability is not the same thing as housing affordability – we may have seen a dip in prices, but the bull market lasted so long that property is still valued at many times most people's salaries.

To put all this another way, a V-shaped recovery for housing is even less likely than for the economy as a whole. The plunge may be over – and that is definitely good news for consumer confidence and the economic outlook – but there will be more rises and falls in house prices to come.