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Good news for UK property? - 23 April 2009

While this week’s budget didn’t really contain any real surprises for homeowners or, more importantly, any real encouragement for first-time buyers, elsewhere in the news there have been some signs of a little more positivity returning to the market. While there are a couple of signs of some movement in property transactions, which was sorely needed, the market for property in the UK is still a long way from recovery.

The two main pieces of good news concerned mortgage lending and house sales themselves through the month of March. A combination of historically low interest rates and house prices which are continuing to fall has resulted in some buyers emerging from hibernation to take on the market in search of bargains.

The first statistic comes from HM Revenue & Customs, and shows that the amount of money lent in mortgages in the UK rose by 16 per cent between March and February to £11.5billion. While this is good news, and shows that there are a few buyers coming back to the market, but placed alongside the fact that the March figure for this year is 52 per cent down on March last year, it shows how far things have to come to be able to hint at a recovery in sight.

The second set of figures suggests that the number of homes sold in the UK jumped by 40 per cent in March, and represents a possible end in sight to the stagnation that has bound the market for the past six months. There were 60,000 property sales worth more than £40,000, compared with 43,000 in February. Part of the rise in sales can be attributed to seasonal differences as there is traditionally a jump in sales as the property market kick back into gear in spring, but even seasonally-adjusted the figures still represent a 13 per cent rise. Nevertheless, property sales remain at their lowest level since the early 1970s, and less than half the number than in March 2007.

The data is in line with other trends seen by the Bank of England – who reported a rise in mortgage approvals – and surveyors – who have seen a steady increase in enquiries through estate agents.

The next stage is to see whether the rise in sales is sustained, or if the continued gloomy news from banks, house prices and a dearth of mortgage products continue to depress the market. The Bank of England reported earlier in the week that there has only been a ‘limited’ improvement in the supply of mortgage since the start of 2009, while the Council of Mortgage Lenders asserted last week that two million households were unable to move under present market conditions as they are ‘trapped’ by negative equity.

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