Money News
Latest data from property website, Hometrack, shows that house prices fell for the fifth month in a row over February, but that there are signs of a modest improvement in demand on the back of lower interest rates. Average prices were down by 0.2% over the month with the annual rate of growth slipping to 1.4%, the lowest level since April 2006.
Despite the continued weakness in underlying prices, the latest survey shows signs of improving demand with the first increase in new buyer registrations since last summer (June 2007).
"In the wake of the credit crunch, demand for housing fell by 45%, but the latest survey shows a small yet important turnaround in demand over February," comments Richard Donnell, Director of Research, Hometrack.
"The modest increase in new buyer registrations is evidence of firming demand, largely on the back of recent interest rate cuts with London and the South East registering the largest increases in demand. However, the growth in demand over February was much lower than over the same period in previous years," adds Donnell.
While Donnell expects demand to continue to improve in the coming months, it's too early to talk of a major turnaround in the fortunes for the housing market. That said, a small but growing number of buyers appear ready to dip their toes in the market again but any upward pressure on prices is likely to remain limited for the foreseeable future.
The greatest turnaround in demand has been seen in London and the South East where new buyer registrations are up 13% and 10% respectively - albeit off something of a low base. The increase in demand has been higher than the supply of homes coming on to the market, which suggests that prices could start to firm in the months ahead.
In contrast, the supply of housing for sale has increased more than demand in the Eastern, North West and Yorkshire and Humberside regions as well as Wales and it is these markets where pricing is likely to remain under pressure in the short term.
"While the latest survey reports prices down across a third of the country we expect the extent of these falls to slow over the coming months as demand continues to improve on the back of lower mortgage rates and a modest improvement in confidence.
"With most of the largest 'falls' being seen in indicators of market activity over recent months it seems likely that these will start to improve over the months ahead supported by the relatively strong economic fundamentals that remain in place. However, with affordability levels remaining stretched there is unlikely to be much upward pressure on average prices in the next few months," says Donnell.
25 February 2008 © Moneyextra.com
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