UK house prices rose by 0.5 per cent to 162,245 pounds in January, versus the previous month, according to the latest data from Nationwide.

Prices were flat in comparison to the levels of a year ago, ahead of the 1.0% fall seen in the previous month.

Robert Gardner, Nationwide's Chief Economist, said: "While activity in the housing market remains muted by historic standards, there have been tentative signs of a pick up in activity in recent months. The Funding for Lending Scheme has achieved some success in bringing down mortgage rates, with some signs of a pick up in lending activity.

"Hopefully, the momentum will continue to build in the months ahead, though much will depend on whether the wider economic environment improves. Progress is likely to be relatively slow on that front if recent trends are any guide."

Similarly to what has been outlined above, the decline in first time buyer numbers continues to be a source of concern for Nationwide. These have fallen from an average of 32,000 a month before the financial crisis to 20,000 currently.

Likewise, the median first time buyer now puts down a deposit of 20% compared to 10% before the financial crisis, as not doing so carries with it a substantial increase in the mortgage rates which they must pay.

Even so, at present the typical first time buyer home costs 4.4 times average earnings. That is above the 20 year average of 3.6 times earnings, but it is well below the highs of 5.4 recorded in 2007.

As well, thanks to the decline in interest rates, lower house prices (currently 11% below their 2007 peak) and a small increase in nominal earnings, the typical mortgage now accounts for around 20% of average monthly earnings, below the 24% recorded before the financial crisis and slightly below the long term average.

Commenting on the data economists at Barclays Research are saying that "Despite the recent increase, activity remains subdued by historical standards. However, there have been some signs in recent months of a gradual improvement in both prices and sales volumes, which has also been reflected in other housing market surveys.

"(...) We expect house prices to stabilise in the near term and forecast a modest recovery to take place towards the second half of the year. We think the modest pick up in overall economic activity and the chronic shortage in housing supply will prop up prices, and also expect the FLS to provide some support (albeit modest)".


AB

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