House price 'bounce' leads to hope of slump easing

Published on Thursday 2 April 2009 22:18

HOUSE prices have risen for the first time in 16 months as buyers return to the market, raising hopes that the worst of the property slump may be over.

The surprise "bounce" saw the cost of buying a home in the UK increase by 0.9 per cent in March, the first increase since October 2007.

The rise put 3,200 on the average house price, which went up from 147,746 to 150,946, according to the Nationwide's monthly house price index. The average price for a home is Scotland is 130,975.

The group also said Scotland had the most resilient market in the country, as it had been the best-performing part of the UK for five quarters.

The surprise increase also led to a reduction in the annual rate at which UK house prices are falling, easing from a record 17.6 per cent in February to 15.7 per cent in March. And Scotland continued to record the smallest annual price falls at 12.6 per cent.

Last night, housing experts in Scotland welcomed the news, but cautioned it was too early for "dancing in the streets". Nationwide also cautioned against reading too much into the monthly price rise, saying it was "far too soon" to see it as evidence that a trough in the market had been reached.

Fionnuala Earley, the Nationwide's chief economist, said: "The Bank of England has already taken strong measures to ease the tensions in economic and financial markets by cutting rates and commencing quantitative easing.

"However, it will take time for these to work through into the housing market before we can expect a sustained recovery in house prices."

But the data could be seen as a potential economic "green shoot", hinting that the recession may soon bottom out.

The recovery is being driven by a spring boom in buyers. The number of mortgage approvals rose last month to 37,900, the highest level since May last year.

Wilson Hunter, a director at the Edinburgh Solicitors Property Centre, said: "This sounds encouraging, but it is too early to be entirely optimistic.

"We are seeing increased activity with sales in Edinburgh up in January and February, and the mortgage market seems to be easing. But we are not at the stage of dancing in the streets.

"The Scottish market had held up best throughout the UK and is always the strongest when there is a dip in the market."

Mr Hunter added: "We still have no evidence that the almost 2 billion the government instructed the RBS to put into the Scottish mortgage market has filtered through. It will probably take two to three months to see the effect of that."

Scott Brown, an estate agency partner at the Edinburgh-based Warners, said: "We're starting to see a bit of confidence returning to the market, and this has been reflected in the fact that we have seen the number of property sales achieve double figures for the past two weeks in a row."

Mr Brown said Warners had doubled its sale figures from January and February levels.

Nick Fletcher, head of policy at the Chartered Institute of Housing Scotland, said the figures should be treated "with extreme caution".

"One set of figures does not mean the market is turning around, but let us hope that this may be the beginning of a move to some form of stability in the house price market," he said.