House prices UK: Drop in prices in May as lender reveals latest mortgage data

House prices UK: Drop in prices in May as lender reveals latest mortgage data

According to the report issued this morning, the Halifax House Price index suggests that average prices decreased by 0.2 percent last month when compared with April yet were still 2.6 percent higher than in May 2019. This contradicts the figures released by Nationwide earlier this week, which pointed to a 1.7 percent drop in prices, the biggest monthly fall on record since 2009.

Understandably, this could create confusion for consumers who might ask how there can be such a discrepancy between two respected sources of information.

Simply put, the reason for the disparity in figures is that both lenders are only reporting on the data they have available for their own mortgage customers, and not the whole of the mortgage market.

As lending criteria and therefore target customers differ, this inevitably creates a variance between the indices, albeit that they cover the same period and have been released within days of each other.

Russell Galley, Managing Director, Halifax commented: “With the full impact of lockdown measures taking a firm grip on the UK property market by May, the average house price fell by 0.2 per cent to £237,808.

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“This is the third successive monthly fall, though more modest than in April, and reflects a continued loss of momentum following what was a strong start to the year. Though it should still be noted that with a limited number of transactions available, calculating average house prices remains challenging and increased volatility is to be expected.

Russell continued: “Looking ahead, we expect market activity to increase progressively as restrictions are eased further across the whole of the UK and we continue to have confidence in the underlying health of the housing market over the long-term.

“However, the extent of downward pressure on market confidence and prices over the coming months will depend on how quickly the economy is able to recover from the effects of the pandemic and the available government policy support for jobs and households.”

Taken at face value, a dip in prices at this level is potentially the result of sellers chipping their selling price slightly to get the deal done during the lockdown period.

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As Marc von Grundherr, director of London lettings and estate agent Benham and Reeves, suggested: “So far the impact of our time in lockdown appears to equate to nothing more than a scuffed knee for the UK housing market, with these marginal declines in price growth far from the compound fractures that many were predicting.” 

Andrew Montlake, Managing Director of Coreco Mortgage Brokers is also pragmatic about today’s figures and observed: “At a time when indices such as these are questionable because of low transaction levels, it is nevertheless interesting to see that despite a full-scale lockdown house prices have only fallen by a small amount.” 

Andrew continued: “This shows one of two things; that the housing market is much more resilient than the doom-mongers suggest, which is almost always the case, or that we are yet to see the full effect of the pandemic on house prices. If this is to come it will be linked to the end of government support for workers in October when we will, no doubt, see a spike in redundancies and unemployment.

“However, even then, the amount of activity that we are seeing now as people return to house hunting suggests that any falls will be modest in comparison with some expectations.”

It would appear then that, whilst a reduction in average house prices is perhaps inevitable, how widespread this may be and to what extent is currently very difficult to predict.

Guy Harrington, CEO of property lender Glenhawk agreed, saying: “The housing market was inevitably going to join the conga line of economic casualties, with consumer confidence completely deteriorating, a labour market in freefall and the logistical challenges presented by social distancing. 

“However, we must note that this crisis isn’t liquidity driven and what hasn’t changed overnight is the huge demand supply imbalance of nearly all housing tenures across the UK.”

“With favourable borrowing costs and further government stimulus including a potentially earlier than expected revision of stamp duty, a swift recovery akin to the Boris Bounce the market experienced in the early part of the year is not out of the question.”

Anecdotal reports over the past week from some of the largest conveyancing companies suggesting that their workloads are not far from pre-Covid-19 levels in terms of processing property purchase cases, and many estate agents and new home builders around the country stating that they are continuing to sell homes at full asking price with no shortage of offers.

That being the case, one has to wonder at what point, if at all, we could see any serious price corrections.

As Marc von Grundherr concludes, “Of course, there will be a number of conflicting data sets as the months go on. The real proof will be in cold hard completion numbers.”

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Published at Fri, 05 Jun 2020 14:05:00 +0000