Nationwide, the UK’s largest building society thinks there is a reasonable chance that house prices could rise over the course of the year. This follows their July house price index which shows a rise of 1.3%, the third climb in succession, pushing the annual rate of decline down to 6.2%. The three monthly rate, often used as a more accurate indicator, rose to its highest level since February 2007. Further signs of an upturn came from the Bank of England who reported that mortgage approvals for house purchase in June were the highest since March last year, while remortgage approvals in May were also above their 6 month average. While this is positive news, questions remain over what’s fuelling the “recovery” and whether it’s sustainable. With the number of properties sold drastically reduced, the small number included in any index is more likely to result in inaccuracies. Furthermore, with fewer properties coming to the market at a traditionally quiet time of the year for house sales, sellers are more likely to achieve a better price as demand can outstrip supply. Over the longer term rising unemployment is likely to dampen consumer confidence and while it is recovering, mortgage lending is still weak. With lenders continuing to show only a small appetite for lending, preferring to concentrate on repairing their battered balance sheets, lack of mortgage funds will also hold back a sustainable recovery. New homes received a shot in the arm from the government, as the number of new homes being built reached a record low this year. It has been announced that around 720 housing developments, mothballed from lack of demand, are to share in a £925 million injection in an attempt to restart the industry.
Nationwide in Bold Forecast on House Prices