As someone in the process of buying a house myself - in a lovely corner of Wimbledon Village as you ask - I’ve got a very good reason to just go along with the optimistic spiel that has followed Nationwide’s surprise announcement. Alas, even I don’t believe we’ve turned the corner. The numbers continue to suggest caution. Rather than recovering, prices may be "bouncing along the bottom" as Bloomberg contributor Matthew Lynn puts it.
From the chart below, we can see the IMF’s measure of fair value in the housing market. The IMF was one of the first groups to warn on the bubble in our housing market back in 2006. Today, it places the UK as the third most overvalued property market in the world with prices roughly 14% over their fair value.
Still too expensive - UK house prices are still 14% overvalued according to the IMF’s economic model 
The IMF’s model is based on wage inflation and economic growth. The inference is that at £158,565, house prices are still £22,199 too dear and could be set for another correction. That is despite the 16% fall we’ve seen in the last 12 months. While I doubt that houses will hit the IMF’s estimate of fair value, I do think the chart should remind us all to manage our expectations.
Despite Nationwide’s mood-improving news, we are not out of the woods yet. House prices and mortgage approvals may be improving but that will itself bring previously reluctant sellers to the market.
Such a supply increase, as well as poor value, may stall the recovery in house prices.
P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.
