Storm clouds are gathering over the UK housing sector, after house prices fell again in March, down 0.4 per cent from a year earlier. More worryingly, prices in hitherto recession-proof London fell 0.2 per cent, the first year-on-year decrease since October 2009, and prices in the relatively affluent South-East fell by 1.4 per cent. But the new build market is holding up well, illustrated by a raft of positive trading statements from the housebuilders.
Taking a closer look, the figures for March were distorted by a rush of first-time buyers trying to complete sales before the stamp duty holiday on properties up to £250,000 came to an end. Even so, Bob Pannell, chief economist at the Council of Mortgage Lenders, conceded that the underlying picture is likely to be one of easing momentum in the housing market, as mounting uncertainty in the eurozone puts off potential buyers, not to mention the continued scarcity of affordable mortgages. The latest CML data shows that gross mortgage lending slid 19 per cent to £10.2bn in April.
But newly-built properties are bucking the trend. While prices paid on pre-owned dwellings fell by 0.9 per cent over the year, new house prices jumped 6.9 per cent. This is good news for the housebuilders, who have already enjoyed an encouraging spring buying season. But now might not be the time to go rushing into the sector. Shares in housebuilders historically enjoy a strong first quarter (see Solid Foundations) and their performance in the second and third quarters is traditionally less impressive. Indeed, amplified by the current market gloom, housebuilder shares are already down as much as 20 per cent from the peaks touched towards the end of the first quarter.
Builders past their peak
| Company | In January (p) | At peak (p) | Now (p) |
|---|---|---|---|
| Taylor Wimpey | 37 | 52 | 42 |
| Persimmon | 471 | 706 | 570 |
| Bellway | 705 | 859 | 703 |
| Barratt Developments | 92 | 151 | 122 |
| Bovis Homes | 432 | 518 | 418 |
