House prices unlikely to recover until 2013 – ITEM Club comments on today’s lending figures
Nida Ali, economic advisor to the Ernst & Young ITEM Club, comments on today’s lending figures:
Today’s figures reflect the ongoing weakness of the housing market
Tight credit conditions and weak market fundamentals suggest that house prices will continue declining in subsequent months
“Today’s lending figures reflect the ongoing weakness of the housing market. Activity has remained broadly flat for a prolonged period, but it’s particularly discouraging to see that mortgage approvals in May were below last year’s levels.
“The near term outlook remains challenging. According to the latest Credit Conditions Survey, banks expect credit availability to decline in the next few months, especially for households with high loan-to-value ratios. The survey also reported that banks are facing high borrowing costs and this is being passed through to the cost of secured household lending.
“Meanwhile, the wider economy remains unsupportive. Unemployment remains high, while households are reluctant to add to their existing debt burden. As such we expect house prices to continue declining in the coming months with a recovery only expected in 2013.
“The rise in consumer credit is a welcome development and tallies with the stronger retail sales figures. Inflation has eased considerably over the past few months and is likely to fall further over the course of 2012. This will help to support households purchasing power and should support confidence. We hope to see a continuation of this trend in the months ahead.”
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