How Should We Feel About the UK Property Price Rise?

According to the latest release of Nationwide's UK house price index, the average price of a UK home rose by 0.9% to £150,000. The news received a mixed response:

Nationwide was unoptimistic, saying it was a "surprise bounce" and too early to talk of recovery, Simon Rubinsohn, RICS chief economist called it "Further signs that the housing market may be stabilising," further because it follows the third consecutive monthly increase in mortgage approvals in February and Winkworths were brave enough to say that the central London market bottomed in 2008.

Patrick Collinson, the Guardian's money editor, questioned our motives for hailing the price rise as good news, irrespective of a UK property market recovery, he writes:

"Why are we so wedded to the idea that a rise in house prices is a good thing? The average house price is now at £150,946. That still puts them at a level equal to an eye-watering five times average earnings. The recent falls have simply restored house prices in Britain to the levels seen in 2004/05. They have not restored a bloated market even close to sanity."

My immediate response was scepticism and pessimism. I don't believe a price rise like that out of the blue signals the market bottoming or the start of a recovery.

The market bottoming will be clearly displayed by a massive increase in buyer activity and a massive increase in sales, when this is followed by a price rise that signals the start of the recovery -- failing a catastrophic relapse.

Then the third consecutive rise in mortgage approvals clicked into my head alongside it, and I felt a little more positive.

It does seem there has been a steady increase in sales followed by a small increase in prices, that could feasibly be a very positive sign. Or it could just mean that lending policies are gradually being slackened, which is positive also.

I will be endeavouring to find out over the next few weeks whether the rise in mortgage approvals corresponded with rising applications, which will tell us whether property sales are increasing or just mortgage approvals.

The rise in mortgage approvals could simply be people pre-qualifying to attend the growing numbers of auctions selling repossessed and distressed properties. The rise in prices could actually be standing on less completed sales.

All in all it is folly to get your hopes up based on a small price increase and marginal consecutive growths in mortgage lending; especially without corresponding figures for sales and mortgage applications. However if both are shown to have risen again in the next monthly release I might be a bit more hopeful.