British house prices return to 2008 levels

Published 02nd Oct 2009

House prices rose for the fifth month in a row in September, taking the average value of a property to levels last seen 12 months ago, figures showed today.

Nationwide’s monthly house price index showed an increase of 0.9 per cent last month but the building society warned that the high price of rental property and low turnover meant that the rate of recovery is unlikely to be sustainable.

With the average value of a property now £161,816, last month was the first time since March 2008 that the year-on-year rate of change has not been negative.

The figures show that in the first nine months of 2009, house prices rose by 4.1 per cent, although they are still down by 13.5 per cent relative to their peak in October 2007.

However, with housing turnover at less than 4 per cent, compared with a pre-downturn churn of about 8 per cent, experts warned that the strong upward trend would be unlikely to continue once more houses began to come on the market.

“One reason to remain cautious about the outlook for house prices is that turnover in the market is still well below normal levels," said Martin Gahbauer, Nationwide's chief economist.

"Given that the housing market still faces considerable headwinds in the form of high unemployment, restrictive credit conditions and an impending withdrawal of the stamp duty holiday, it would be surprising to see house prices continuing to increase at the very strong rate seen in recent months."

A key question that will determine the house prices outlook for the next few months is whether the supply of homes for sale will remain low.

Many homeowners are choosing to let their houses rather than sell at prices lower than desirable while they wait for the housing market to recover. The surge in ‘accidental landlords’ has limited the supply of houses available for sale and increased the number of homes being let, pushing house prices up but sending rents down.

Yet there were signs that the number of "accidental landlords" was beginning to taper off, suggesting that homeowners could be preparing to sell, Mr Gahbauer said.

Source: ' Times '

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