House prices back to 2008 levels - are you kidding?

Somehow, unlike others, you just don't get the impression that these guys are talking their own book or that maybe they might just be flogging a dead horse purely for the benefit of publicity or to get more people to come into the branches.
But even if I do believe that Nationwide do what they say on the tin I find the latest set of house price indicators from Nationwide Building Society that includes headlines suggesting house prices last month rose 0.9 per cent and now back up to where they had been back in September 2008 somewhat difficult to comprehend.

It is not that I am suggesting for one moment that they are wrong in parts of London and the South East for example. Far from it but it is more an expression of innuendo concern that house prices may now be back on a permanent rising trend. They aren't and they won't be for some considerable time!

Whilst it may well be true that in price terms certain segments of the overall private housing market and/or particular market segments have now risen back up to levels last seen in the 'fall' of 2008 there is actually no evidence to suggest that this 'excellent' news could possibly be interpreted nationally.

Certainly not in Scotland, Wales or the North-West. Indeed, house prices in the West Midlands for instance apparently remain very depressed even if there has now been a touch of improvement in market momentum and sales and there are many parts of London that I am told have seen little if any improvement.

Nevertheless, there is no doubt that house prices in many areas have over the past four months recovered some lost 2008 and early 2009 composure. We also know that where house prices have recovered closer to those of a year ago can be put down to a combination of shortage of available property plus a partial release of long-standing pent up demand.

In other words, whilst the May to September period witnessed some buyers returning it seems that though slightly up the actual amount of property available in estate agents windows remained at very low levels. This boils down to there being too little available property to service a market in which there had been a small yet important improvement to sentiment, the availability of mortgages however expensively priced and demanding of sizable deposits combined with the fact of a government trying to sell us a better feel good factor in terms of the slowing down in the rate of those losing their jobs and, in their words, a return to economic normality. Right or wrong this has been enough to bring out some few pent up buyers that had been lurking in the woodwork.

Clearly by sounding off more positive views of the housing market and prices some will hope that interest in moving house for whatever reason might be spurred. Pushing the view that house prices are back up to a level a year ago will also likely bring more potential sellers into the market. Indeed, there has already been evidence that gazumping has been exampled in a few market areas. But what next - even if the mortgage lenders are right is now the time to buy and/or move?

If you are needing to move either up, down or sideways in this market then now is probably a very good time to attempt it. However, while I would not dream of attempting to put any first time buyer off taking a first step on what must be seen now as a long term housing market ladder I would be wrong not to show a concern that a year from now house prices might just be a touch lower.

Indeed, looking at this diverse and still very difficult market my best guess is that for the next couple of months supply and demand will generally come closer into balance and equilibrium. Nothing wrong with that of course and if it proves to be correct then house prices will likely level back off as we move into 2010. Indeed, I would reckon that that we will now see a quite reasonable rise in the number of properties being made available by owners whilst at the same time mortgage markets remains tight. That combination in itself could be a further depressant in the months ahead.

Whatever, even with the likelihood of low interest rates continuing, fewer affordability issues than for some considerable time and an election and likely change of government looming ever closer, given the parlous state of the UK economy plus continuing concern over jobs and rising taxes with the best will in the world the outlook for the housing market can only be weak despite ongoing pent up demand.

The good news though is that unlike bloated housing markets in say Spain and Florida, the UK housing market was never built on speculation - even if sometimes it seems like when looking at ridiculously high house prices!

Having stuck my neck out and said if you are going to move then do it now there are some other worrying factors to note. One is that while estate agents have clearly been enjoying a significant improvement in the number of deals being arranged with potential buyers I am reliably informed that a much higher level of agreed deals than is normal are failing to be completed.

Nevertheless, according to the latest available figures from the British Bankers Association, the number of new mortgages in August was up 81 per cent on the same month last year and are now back up to levels of early 2008. Interestingly remortgages were down 47 per cent year on year in August according to the BBA showing the desire of consumers to batten down the hatches and save despite extremely low interest rates. Other good news in August was that consumers paid back more credit card debt than they actually took on although it must be said that the level of personal consumer borrowing may still be at an unsustainable level.

Calling the forecast shots in the housing market is of course never easy - except of course to get wrong! However, in this job one is duty bound to give a view and I will not be accused of standing back: I suspect that if house prices are now back up to the best levels of 2008 as we are now being told then that is about as far as they will go for now.

In 2010 I suspect that during the first six months we will if anything see a slight decline in prices before they then move into a long period of stability - or flat-lining if you prefer - just as they did for around five years back in the early 1990's. Given that the UK economy will struggle for several years yet as a hopefully 'new' government next year begins to grapple with how to pay down the excess of national debt there is no reason to believe that property prices will be anything other than flat during the majority of 2010 and even 20100 - running at a just slightly lower level in many of the more high profile market areas than they are apparently running today.