Recovery in the housing market stalls

The stuttering recovery in the housing market appears to be mis-firing again with fresh figures showing the number of home purchasers remaining at broadly the same level in March as in the previous two months.

Monthly figures issued yesterday by the Inland Revenue showed 89,000 properties changed hands in March on a seasonally adjusted basis, down from 91,000 in February and 97,000 in January.

The disappointing figures came as a monthly survey by the Building Societies Association, the industry trade body, showed the number of net new commitments by its members was 42,000 last month, down from 43,000 the previous month.

Net commitments are an important indicator of future demand in the housing market, reflecting purchases still six or seven weeks from completion. However, the BSA's figures showed commitments stalled at the same level as 12 months ago.

Separately, a separate survey by big British banks showed a slight drop in loans secured on properties, down from pounds 647m in February to pounds 632m in March. The total was still up on March 1995, when lending stood at pounds 554m.

Jonathan Loynes, UK economist at HSBC Markets, said: "[These are] surprisingly weak commitment numbers given recent surveys and anecdotal evidence pointing to a further pick-up in housing market activity. We remain confident mortgage demand will continue to climb in the months ahead. But the rise so far has only made good the ground lost in the first half of 1995.

"Further progress is likely to remain patchy as the rise as the rise in market interest rates prompts the disappearance of cheaper fixed-rate deals available at the start of this year."

Mr Loynes added that although the market had enough momentum to sustain further price rises in the next few months, an upturn in demand was crucial to sustain it beyond the summer.

Despite the gloomy comments, the BSA claimed to be reassured by separate figures showing a sharp jump in new mortgage lending, excluding re-mortgages, to a nine-month high of pounds 1.03bn in March, from pounds 603m in February.

Peter Williams, head of research at the BSA, said: "Strong lending reflected the traditional spring factors, encouraging people to move house now. This is underlined by seasonally adjusted figures which show both net advances and approvals almost unchanged from last month."