The five major UK house price indices show an average of 3.9% annualised growth for the twelve months prior to March 2008. This shows a decline in the annual rate of growth recorded in February 2008 (5.1 %) and a 6.7% decrease from the March 2007 annual growth rate of 10.6%. See Graph 1 below.

 

 

While monthly house price growth declined in March, annualised monthly house price growth (showing short term trends more clearly) offers a different perspective when viewed over a longer period. Data showing three and six month moving averages of monthly growth reveals that growth has stabilised at around 0% since the start of the year (Graph 2) and that prices do not appear to be falling. This is confirmed again by looking at average house prices themselves – just £217 lower in March than the December figure of £212,145 (0.1% lower).  

 

Short-term data does not indicate long-term price falls…

Annual house price growth in March slowed to 3.9% and the average monthly change from February was -0.6%, taking prices back to levels seen towards the end of 2007 and marginally bringing down the average from the previous month. The average annualised rate of growth has reached the lowest level for over two years and is now close to bottoming out. The three and six month annualised moving averages have clustered around 0%, representing a flat-lining rate of growth and suggesting a possible return to upward movement if the mortgage market unclogs over the next few months.

 

The outlook is NOT so bleak…

Property prices have remained firm since the beginning of the year, with a current average of £211,929 in March – down only £3,150 (1.5%) from the peak experienced five months ago – £215,079 in October 2007.

 

The average house price in March 2008, taken from the average price provided by all five major indices showed a decrease of just £673, compared with the previous month’s average figure and an increase of £6,767 in the twelve months from March 2007, when the average price of a home was £205,162 (Graph 3).

 

Buy-to-let remains strong…

The current negativity has resulted in a significant fall in the number of first-time buyers entering the market over recent months and many are expected to stay away over the short term. As a result, strong rental demand is set to continue, which is good news for landlords. With an increase in repossessions and auction activity expected over the coming months, as borrowers with poor credit ratings struggle to remortgage, experienced buy-to-let investors are expected to capitalise upon these opportunities. 

 

Bank intervention begins…

The long-awaited state intervention into the credit crunch looks like it has finally arrived this month, as the Bank of England looks set to launch a new lending programme for UK banks, to inject some much needed liquidity into the market. For borrowers, this means that the mortgage market will get a kick-start, allowing all the mortgages stuck on lender’s books to be converted back into a more liquid form, to permit re-lending again. It is likely to take until September for some normality to return to the market but an increase in buy-to-let mortgages, rather than a decrease is expected over the next few months.

 

 
“While the annual house price growth figure dipped in March, there are more revealing statistics that show we are far removed from a property market crash in this country. The moving six and three month figures for average annualised house price growth have actually bounced back since January and while this figure is hovering at around 0%, I am confident that prices have now bottomed out and will not fall any further," Stuart Law, Chief Executive of Assetz, comments.

 

“These moving average figures paint a clearer picture of market performance over a more sustained period and reveal that while average annual price growth has flat-lined, actual house prices have most certainly not decreased on average, year-on-year, over the last few months. In fact, house prices in this country remain extremely robust in the face of recent problems in the mortgage market – down only 1.5% in March since the highest recorded average, taken in October last year.

 

“The figures we are currently experiencing can be largely attributed to a stand-off in the market between buyers and sellers, as well as a limited number of forced sales in the present climate. With an increase in repossessions and auctions expected over the coming months, as those borrowers with a poor credit rating struggle to remortgage, the opportunity for investors to move in will be rife. It is now an excellent time to grab a bargain before the summer, when finances are likely to start to improve, increasing demand across the board and driving prices upwards again.”

 

The Assetz House Price Watch is an overview of the data supplied by the five main house prices indices: Financial Times House Price Index (FTHPI), Rightmove, Nationwide, Halifax and the CLG (Communities and Local Government).