Government housing data provides further cause for market optimism

THE DEPARTMENT of Communities and Local Government (DCLG) was yesterday the latest to announce improving data for the UK housing market. <br /><br />Between March and April there was a rise of 1.1 per cent in the prices index of properties bought, putting the price of an average UK house at &pound;189,215, compared to &pound;187,193 a month earlier<br /><br />In the quarter ending in April, UK house prices fell by three per cent compared with a fall of 3.9 per cent for the quarter ending January 2009, indicating an easing pace of contraction in the housing market.<br /><br />However, the DCLG data is not seasonally adjusted and IHS Global Insight&rsquo;s Howard Archer notes that house prices tend to be firmer in April.<br /><br />Annual average house prices paid by first time buyers in April 2009 were 16 per cent lower than a year ago. But while affordability is improving, there is still some way to go before the housing market properly turns upwards according to economists.<br /><br />Ed Stansfield, property economist at Capital Economics, said: &ldquo;Our view that the house price correction has much further to run is also consistent with the evidence from the house price to earnings ratio that the housing market remains seriously overvalued.&rdquo; <br /><br />He adds that there are few signs of the easing in mortgage credit conditions that would be required to bridge the gap between house prices and average earnings.<br /><br />But better data has led property economists to believe that from here onwards, house prices will fall more slowly than they did last year and forecasts are starting to be revised upwards for 2010. Capital Economics now expects a five to seven per cent fall in prices in 2010.