According to a new survey from Nationwide, the UK housing market remains in a subdued state.
Average house prices rose by 0.3% during May.
They remain 1.2% lower than prices a year ago and now stand at an average price of £167,208.
These figures mean that average house prices have increased by a modest 0.6% during the past six months.
Recent figures from HM Revenue & Customs seem to confirm a stagnating UK housing market.
A total of 66,000 homes were sold during April. This is 1,000 fewer than the number sold in the previous month and 6,000 fewer than the number sold during April last year.
What does this mean for the UK economy and investment markets?
House prices are an important contributor to consumer confidence.
When prices are rising, people feel more confident about their overall levels of wealth and are more likely to spend money. This helps drive economic growth.
A stagnating or falling housing market is likely to result in lower levels of consumer confidence and this will do nothing to help the currently fragile UK economic recovery.
The banks appear to remain the root cause of the issues in the UK housing market.
Total mortgage lending and mortgage approval figures from the Council of Mortgage Lenders and Bank of England respectively show little improvement on historically low levels of lending activity.
Until the banks are willing and able to restore lending, rather than using profits to bolster their balance sheets, the UK housing market is likely to remain stagnant.
Successive governments have been unable to address this issue, despite large taxpayer stakes in some of main lenders, so a return to a ‘normal’ lending environment is unlikely to occur any time soon.
Whilst the economy and investment markets are not necessarily correlated during the short-term, over the longer term UK companies do need a stronger UK economy to deliver better returns to shareholders.
Photo credit: Flickr/Diana Parkhouse
