House prices remain sluggish, Nationwide says

More evidence of a sluggish start to the year in the UK housing market has been published by the Nationwide Building Society.

Prices across the UK rose by 0.7% in March, but the longer term picture showed a slow down in house price inflation.

The average UK home cost £164,519, some £14,000 higher than a year ago.

But the annual rate of increase of 9% was slower than the 9.2% recorded in February.

The Nationwide said over the past few months the property market had become more subdued.

In the three months to the end of March prices rose by 1.6%, compared with a 1.8% increase in the previous three months.


"The last two months are consistent with a relatively flat profile for house prices, and in line with the recent drops seen in buyer enquiries and house sales," said Martin Gahbauer, the Nationwide's chief economist.

The 0.7% month-on-month rise in March was a reverse of the previous month's 0.8% fall, but mortgage activity remained low, suggesting no great upward pressure on house prices.

"Preliminary figures show that the number of loans taken out for house purchases failed to recover from January's large dip, suggesting that weakness in house sales at the start of the year may have been due to more than just the snowy weather," Mr Gahbauer added.

Figures released earlier this month by the Land Registry, which is considered the most comprehensive survey for England and Wales but lags behind others, showed that prices fell by 0.3% in February. They were 7% higher than a year ago, and the annual rate had quickened from 5.2% the previous month.

Stamp duty

At the end of last year, sales were boosted by the 1 January 2010 reintroduction of 1% stamp duty on homes costing between £125,000 and £175,000.


In an attempt to keep sales ticking over, last week's Budget introduced a new policy.

The 1% stamp duty band - which cover homes worth between £125,000 and £250,000 - will be abolished for two years, but for first-time buyers only.

The Nationwide said it would save £1,368 for the average first-time buyer, but Mr Gahbauer was unsure if it would made much difference to the market as a whole.

"Over the course of the last [stamp duty] holiday, there was indeed a modest increase in house purchase transactions, with most of the pick-up seen during the second half of the exemption period," he said.

"However, transactions remained well below normal levels throughout and it is not clear how much of the pick-up was attributable to other factors such as the record cut in interest rates.

"In addition, there was no appreciable increase in transactions at the lower end of the chain," he pointed out.


The number of homes sold in the UK rose in February. Figures from HM Revenue & Customs (HMRC) have shown that the number of completed sales rose by 14% from January, to 58,000 last month.

But this was still substantially fewer than the 103,000 sold in December.

With figures from the Bank of England showing on Monday that the number of new mortgages approved for home buyers fell slightly from January to February, the property market seems likely to stay subdued for at least the next few months.

"Although more supply has begun to come on to the market, it has yet to reach the level where it is matching demand," said Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors (Rics).

"From a regional perspective, the Nationwide numbers predictably show London and the South of England continuing to see the strongest price performance."


source: Tuesday 30th March 2010