House price recovery to take three years, agent says

Figures from Nationwide Building Society yesterday showed that house prices fell by 0.4 per cent in April, reversing March's 0.9 per cent increase. The main factor behind the drop appears to have been the difficulty experienced by new buyers in obtaining mortgages as banks tighten their criteria and demand bigger deposits.

Fionnuala Earley, chief economist at Nationwide said: "While affordability is indeed more favourable and there does seem to be some cautious optimism from some quarters, it is still far too soon to say that this is the start of a solid revival in the market."

Although the annual fall in property values eased slightly, from 15.7 per cent to 15 per cent, property group Savills pushed back its expectations of a recovery in the number by 12 months, to 2012.

With Land Registry figures showing that the number of transactions in the housing market in January was as much as 57 per cent lower than in January of 2008, Savills said it expected the worsening UK economy to continue to affect house prices adversely and thinks there will be little growth in the housing market, particularly in London and the South East.

Yolanda Barnes of Savills said the market was continuing to split into "the equity haves and have-nots", with only customers who can provide a hefty deposit able to take advantage of lower prices.

Measures already taken by the government to try to support the industry, like the stamp duty holiday, seem to have had little effect so far and Savills expects prices to drop around 11 per cent this year, although this is somewhat better than the 14.7 per cent decline seen in 2008.

WHAT THEY ARE SAYING
David Dooks, British Bankers' Association, in the Wall Street Journal: "The banks' figures also show it would be unrealistic to expect the mortgage market to recover in a steady and consistent way in the current economic environment."

Simon Rubinsohn, chief economist for the Royal Institution of Chartered Surveyors, in the Independent: "The best lead indicator of prices is actually the Rics sales to stock ratio, which has recently begun to edge upwards. This indicates that prices may begin to stabilise in the latter part of the year." ·