House prices up but 'too early' to call end to crash

Average cost of home rises for first time in 16 months but year-on-year values still down
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The Independent Online

Nationwide said the cost of a home rose by 0.9 per cent, raising the price of the average property from £147,746 to £150,946. The rise was the first recorded by the building society for 16 months and slowed year-on-year property deflation from minus 17.6 per cent to minus 15.7 per cent.

Nationwide's chief economist Fionnuala Earley and other commentators nonetheless warned that it was too early to call an end to the house price crash.

"The Bank of England has already taken strong measures to ease the tensions in economic and financial markets by cutting rates and commencing quantitative easing," she said.

"However it will take time for these to work through into the housing market before we can expect a sustained recovery in house prices."

Nationwide's survey follows other positive news on the housing market, coming just days after the Bank of England said mortgage approvals jumped by 19 per cent in February.

The Royal Institution of Chartered Surveyors said that interest from potential buyers rose for the fourth month in a row during February while the property intelligence group Hometrack reported a slowing in the rate of house price falls during March and higher sales.

The Nationwide said March's upturn in activity was likely to reflect the return of buyers who had delayed purchasing a home during the worst of the financial turbulence at the end of 2008.

As if to underline the impact of the existing falls, it released a geographical breakdown of the property crash, showing which areas had been hit hardest. Prices in England fell by 17.6 per cent in the South and by 15.7 per cent in the North in the 12 months to March.

Northern Ireland fell the most,by 29 per cent, year on year. Scotland lost 12.6 per cent and Wales was down 8.3 per cent, year on year.

"It is important not too read too much into March's rise in house prices," said Howard Archer, the chief UK and European Economist at IHS Global Insight. "Nevertheless, there are increasing signs that the housing market may have passed its worst point. However, housing market activity remains extremely low and any pick-up in activity over the coming months is likely to be gradual and fitful."

Seema Shah, a property economist at Capital Economics, also expressed caution. "The surprise rise in house prices in March does not mean that the housing market correction is finished," she said. "Monthly house price indices are volatile, so one month's increase is likely to be a blip in the underlying downward trend. What's more, with the economy contracting sharply and lending criteria still tight, downward pressures on house prices remain strong."

Simon Rubinsohn, the chief economist at Rics, remarked "the housing market may now be out of intensive care", but added that it remained some way short of normality.

Prospective buyers waiting for the market to bottom out before putting in an offer might feel the time had come, suggested Louise Cuming, the head of mortgages at

"So news such as this might prove to be the catalyst that gets the wheels of the mortgage industry turning again," she said. "There is always a need for caution when making predictions about the housing market," she said.

"These figures may prove to be anomalous, but equally they may show that some measures taken by the Government and the Bank Of England have started to pay dividends. Only time will tell," Ms Cuming added.