UK house prices rose unexpectedly between March and April, according to data from mortgage company Nationwide that indicated the property market was stabilizing as borrowing costs fell.
Prices rose 0.5 percent last month, ending seven consecutive months of decline, beating analysts’ expectations for a 0.4 percent decline.
Robert Gardner, chief economist at Nationwide, noted “temporary signs of recovery” in the real estate market reflecting a recent improvement in consumer confidence and an easing in mortgage rates after peaking in the fall following Liz Truss micro budget.
Consumer confidence rose to its highest level in more than a year in February. Mortgage approvals are expected to show a second consecutive increase in March, according to analyst forecasts for Bank of England data to be published on Thursday.
“The buyers are finally starting to move after months of waiting and procrastinating,” said Tomer Aboudi, director of real estate lending at MT Finance. He attributed this trend to expectations that inflation will fall sharply by the end of the year and that the Bank of England bank rate is nearing its peak.
Nationwide said home prices fell 2.7 percent from April last year. This is lower than analysts’ expectations for a 3.6 percent decline and 3.1 percent in the previous month, when it was the sharpest contraction since the 2008-2009 financial crisis.
Tom Bell, head of UK residential research at Knight Frank, said the property market was “coming back to the ground rather than falling off a cliff”.
The median home price rose to £260,400 in April. While this is down from a peak of £274,000 in August, it is still £44,000 above the level in February 2020, before the first Covid-19 restrictions. This reflects a market boom boosted by record low interest rates, making real estate unaffordable for many families.
Strong nominal wage growth and mortgage rate easing could help affordability in the coming months, but many economists said April’s price hike was unlikely to mark the start of a major recovery.
Nationwide’s Gardner said any improvement is likely to remain “rather pedestrian” as a result of the ongoing cost of living crisis and because mortgage rates are still higher than a year ago.
Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said he expects the housing market to bottom out only at the end of this year, sending prices down 8 percent from peak to trough.
“Demand is likely to remain weak enough to ensure that the stock of unsold properties continues to rise and prices continue to fall,” Toombs said.