House price rebound won’t last

Wednesday’s data from the Halifax adds to the evidence that house prices are enjoying a bounce after falling almost 20% in 18 months. July’s 1.1% rise was the third rise in the index this year, cutting the net fall since December to less than 1% and the year-on-year drop to -12.1%, compared with -15% in June. Meanwhile, last month’s Nationwide index showed Britain’s house prices climbing for three months in a row.

What the commentators said

The chances are that the housing market has only “found a resting ledge on the way down”, as Lex put it in the FT. At present there is a shortage of housing because low interest rates mean that the number of sellers has fallen steeply. But this is unlikely to last. As David Smith of Carter Jonas points out, “the worry is that this shortage … will cause buyers to sit on the fence again as they shy away from committing to a purchase at a higher price”.

What’s more, if prices keep rising, the shortage will ease as sellers who have been holding off put their homes on the market, said Capital Economics. Credit remains tight, which will “keep a lid on what buyers can afford to pay” and limit the number of potential buyers – mortage approvals are far below levels consistent with house-price rises.

The dearth of mortgage credit won’t change “dramatically in the near term”, said Martin Ellis of the Halifax. Mounting unemployment is also “a considerable headwind”. Throw in the fact that prices are still historically high, said Capital Economics, and it’s clear “this is not the end of the house price correction”.