Posted by: Jules Birch04/06/2010
New figures from the Halifax showing a 0.4% fall in house prices in May will add to the sense that the housing market is at a turning point.
The survey from the Lloyds Bank subsidiary presents a much more sober picture than the one on offer from the rival Nationwide yesterday.
On the Halifax measure, prices have declined slightly in 2010 after two monthly rises and three falls. In contrast, the Nationwide index is up 4.3%, putting prices less than 10% below their 2007 peak.A gap between the two is not unprecedented but the Halifax index has been consistently lower than the Nationwide’s over the last year.
Low levels of turnover and the fact that the Nationwide lends proportionately more in the buoyant London market probably explain the disparity.The price surveys followed Bank of England figures on Wednesday that showed house purchase loans in April were up 2% on March and 10% on last year.
That may seem like a modest improvement but lending levels are actually down significantly on the last six months of 2009.And that was enough to prompt the Council of Mortgage Lenders (CML) that it may have to downgrade its forecast for lending in 2010.
Given that its existing forecast of £150bn of gross lending and £15bn of net lending (new loans minus redemptions) represented only a modest improvement on 2009, that would signal a slowdown to come. All eyes are now on the emergency Budget on June 22. They will look first to see what the government does about capital gains tax (CGT) on second homes and buy-to-let property.
The Nationwide warned that any gap between an announcement and implementation could trigger a sell-off with big implications for the wider housing market. The abolition of home information packs (HIPs) will also increase the number of sellers in the market - but will a tough Budget and the prospect of spending cuts and job losses to come put off buyers?But lenders will also be looking for signals about what the government plans to do about the £300bn of Bank of England funding that is currently propping up the mortgage market.
On current plans, that will be withdrawn in four years’ time, potentially kickstarting a new credit crunch.Despite the long-term shortage of new homes, the Halifax’s prediction that prices will be flat in 2010 is starting to look over-optimistic.
From Inside edge
Housing commentator Jules Birch puts the latest news in context