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House price rise and surge in shares brings 'ray of sunlight'
Jonathan Prynn2 Apr 2009
Hopes of an economic revival received a huge boost today from a surprise house price bounce and a surge in share prices.
Property values went up 0.9 per cent last month, the first rise since October 2007, according to figures from the Nationwide. Experts described the rise as a "narrow shaft of sunlight" for homeowners after 18 months of almost unremitting gloom.
In the City the FTSE-100 index of leading businesses broke through the 4000 barrier for the first time since 20 February on hopes that the G20 summit will hasten an end to the worst global downturn since the Second World War.
By lunchtime the Footsie was up 86 at 4041 - 15 per cent above the trough hit on 3 March. It followed a 152-point rise in the level of the Dow Jones Index on Wall Street yesterday.
But it was the unexpected rise in property prices that provoked the biggest excitement on one of the most upbeat days for the economy since Northern Rock first got into difficulties a year and a half ago. Nationwide said the average price of a home in Britain rose £3,200 in March from £147,746 to £150,946. But the building society said it would be "unwise" to read too much into one month's figures.
Prices are still 15.7 per cent below their level in March last year and 19 per cent from their peak level.
Property commentators said that prices will start to stabilise as confidence returns to the market. Peter Rollings, managing director of estate agents Marsh & Parsons, said: "London's house price slump is at the bottom now. I don't for a minute think prices are going anywhere fast, but they should stop falling."
There was more good news from the Bank of England, which said there were signs that banks will soon start to relax about lending to consumers and companies. In its quarterly Credit Conditions Survey the Bank said that for the first time since the start of the credit crunch a majority of lenders expect to increase advances to households over the next three months.
Most banks have been hoarding their cash and refusing to lend over the past year and a half because of their huge losses. But a £1.3 trillion wave of taxpayer-funded bank rescue and support packages and a programme of "quantitative easing" finally appears to be thawing the frozen credit markets.
Amkit Kara, an economist at UBS in London, said: "You can't tighten your lending standards for ever. We may have reached a bottom for mortgages and lending to companies may kick off again too."
One of Britain's biggest high street banks HSBC said it was relaxing the terms of its best mortgage deals. From Monday borrowers will only have to find a 25 per cent rather than a 40 per cent deposit to access its best deals.
The high street also shared in today's optimism. Forecaster Synovate said it expected 4.1 per cent more shoppers this Easter fortnight compared with last year, the biggest rise in five years.
However, some commentators counselled caution on house prices. Nick Hopkinson, director of Property Portfolio Rescue, said: "Sales volumes are currently so low that the monthly house price statistics from any one single lender are virtually meaningless."
Reader views (22)
Mark Burton,
There is a massive shortage of houses, which is why the prices went up at unsustainable rates.
The inability to borrow money for housing is a major reason why prices have fallen recently.
The slight easing of the money supply has meant that people are thinking of buying houses again. The figures may be a temporary blip, but they are showing some confidence in the housing market.
It is a Supply and Demand issue and the Demand is increasing as people think they are spotting bargains on the market.
As long as this is backed up with sensible lending processes it is good news/
- Andrew, London W1, 05/04/2009 21:56
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Andrew of London - UH have you not learned anything over the last couple of years, it's not about supply and demand anymore and yes i KNOW that prices have fallen, they need to fall FURTHER. Your camp had been arguing for years that prices could not fall, but they did, and will keep doing so for quite a while yet.Read Darius Midwinter's comment - he is dead right.
- Mark Burton, St Ives. Cambs, 03/04/2009 17:43
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merely a blip, dead cat bounce.
one of several that'll briefly poke their head above the parapet before dodging further down.
history evidences that recessions/depressions, call it what you may do not enjoy such brief shelf lives.
the 89 one lasted a good few years and this is supposed to be the deepest for many a long decade.
- M.O'Brien, london.uk, 03/04/2009 17:37
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It is very good news that house prices are now rising again and that the green shoots of recovery will soon be turning into a tropical forest.
This good news, coupled with the massive bank bailouts should mean that I will now soon be able to apply for a further advance on my mortgage using one of those 'self-certification' of income forms.
The only strange thing is that there seem to be an awful lot of unsold properties here in London, and a steady rising tide of unemployment. Oh well if they say the recession is over and all's well then who am I to think otherwise?
- Steve, London,UK, 03/04/2009 11:23
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No - house prices must be allowed to fall to the correct level of 3x average salary, or we would have gained nothing.
A house should be a HOME, not seen as an investment.
It is important that the next generation be able to afford their OWN mortgages, not just on the back of inheritance, which they have made no effort to achieve, and will keep prices at unrealistic levels.
If nothing else, we should at least have learned this lesson from the mess created by the house buying frenzy of the last 10 years.
Also, don`t forget that this and the next generation will be saddled with debt and higher taxes, so have even less to spend on a mortgage, especially if interest rates return to 7 - 10%, a reasonable rate for savers.
At todays wages the average price of an average house should be around 75k, not 130.
- Darius Midwinter, London UK, 03/04/2009 10:55
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Why on earth is an increase (inflation) in house prices a good thing? When will editors become responsible and tell their readers the truth and educate those who need it.
- Adrian, London., 03/04/2009 09:28
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Why are rising house prices good news? Most existing homeowners want trade up at some stage and rising prices either put that purchase out of reach or require them to take on a mountain of debt. And for those people who have no interest in moving the price of their house is irrelevant. The only people rising prices benefit are those inherit, and for them it's extra money so be grateful someone has left you something at all
- Roger, London, 02/04/2009 22:17
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Mark of St Ives. Uh...the house prices HAVE fallen. Now they will start to climb. There is still a severe shortage of housing in the UK, and there is even LESS building last year and this scheduled.
- Andrew, London, UK, 02/04/2009 22:06
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They say the bottom is hit when everyone has given up hope. Based on the comments below we have hit it.
- Mike, london, 02/04/2009 18:15
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A false dawn, house prices must fall back to enable the economy to start building again - the last thing we need is another housing bubble!. Anyone agree?.
- Mark Burton, St Ives. Cambs, 02/04/2009 17:40
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What will happen when interest rate rise again ?
Do we really want more of the same or do we want a policy where a house is a home avaliable to all families and not just an asset to rise and rise as it did it did in the years74,91,and 08.?
- Bernard Parke, GUILDFORD, 02/04/2009 16:58
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One day up one week of downs. The euphoria will soon blow over and everyone will be back in the real world struggling with the downturn, job losses etc...
- Peter Noterfed, Paris, France, 02/04/2009 16:53
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Might the surge in shares be down to people sticking money into their Equity ISAs ahead of the deadline. It will be interesting to see what the FTSE does next week
- Pete, London, 02/04/2009 16:23
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Well done Gordon Brown for engineering this transformation in our economic fortunes and so soon too
- Keith Price, Luton, England, 02/04/2009 15:47
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It's just the economic corpse jolting from the electric shocks of the massive financial stimuli it's been administered. Expect many such false dawns and dead-cat-bounces in the months and years to come talked up by greedy market players and politicians eager to reassure the voters. After the Wall Street Crash shares recovered more than half their value within a couple of years but then crashed again - 1929 values weren't finally regained until 1950: twenty one years, a great depression and a world war later.
- Richard Kennard, London, 02/04/2009 15:34
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We have a fundamental mis-match of supply and demand in housing in this country, and the news that new building is at its lowest yet means that isn't going to change anytime soon.
- Roy, England, 02/04/2009 15:30
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One word comes to mind 'BLIP'
- Grumpy As Hell, wimbledon, 02/04/2009 15:26
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If you believe in miracles and not in real economic facts then you will believe that the worst is overfor the housing market. But because I believe in economic realities I say that the worst on housing is still to come.This Brown government is trying to buy time to foll the people with false economic facts and try and stay in power by winning the next years or even before elections. One thing is sure after the election no matter who wins we are going to see the real face of this financial catastrophy that Brown and his nu labour has caused to this country.
Unemployment ,inflation and repossessions will reach the sky and the house prices will come down by another 30-35%.The country owes too much -Brown has made sure for this- who is going to pasy this huge debt which is growing bigger by the minute as Brown in his thirst for power is borrowing his way out of debt by creating more debt for the country The same applies for those people who are willing this moment to humb on the housing market price speculation wagon. I hope I am wrong but in front I see the way to the abyss.
- Nicholas Bsc Econ, LARNACA-CYPRUS, 02/04/2009 13:51
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I suspect that this has more to do with the very low mortgage rates than a general recovery in the economy. Overall houses are still overvalued and outside the range of most first time buyers. A 3% increase in interest rates would see prices dropping noticeably - they have a way (down) to go yet.
- Michael, London, 02/04/2009 13:33
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The path downwards for house prices is not necessarily linear. With unemployment rising and credit still tight it's not worth reading too much into one month's stats.
- Matthew, Ware, Herts, 02/04/2009 12:28
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The path down is never smooth, there will always be the odd month here and there that shows a slight rise. The reality is that with the recession kicking in and unemployment rising fast prices are bound to drop for a good while longer. A good many people I know are too afraid of being made redundant to buy now.
The rise might be also be because certain backward looking people will think now is cheap compared to the peak in summer 2007 ... which is true, but then prices are still way too high compared with earnings and the historic average. I reckon we have another 20-30% drop coming. Remember, residential property in Tokyo fell some 70% peak to trough and has STILL not yet recovered, nearly 20 years later. I pity those people who thought that bricks and mortar could serve as a pension!
- Sam, London, 02/04/2009 12:10
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Don't worry they will drop again. This is due to lack of supply because most people are not thinking of moving.
- Dave Davies, Basingstoke, Hants, 02/04/2009 11:28
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