House prices fall again as more than £2,000 is wiped off the average value

Published 28th Oct 2010

House prices fell by 0.7 per cent during October as buyers stayed away from the market over fears about the wider economy.

The average cost of a home in the UK dropped by nearly £2,400 to £164,381 as the downward trend in prices seen since the start of the summer continued, Nationwide said.

House prices have either fallen or remained static in every month since the end of May, with the drops seen during 2010 nearly wiping out the gains made during the early part of the year.

House prices have come under increasing pressures in recent months as potential buyers have adopted a 'wait and see' approach until the impact of looming Government cuts on the housing market and the wider economy becomes clearer.

But sellers have continued to return to the market, creating a mismatch between supply and demand and giving buyers the upper hand in price negotiations.

The quarter-on-quarter change to house prices, which is generally seen as a smoother indicator of market trends, also showed that the rate at which property values are falling has accelerated.

House prices dipped by 1.5 per cent during the three months to the end of October, compared with a 1per cent slide during the quarter to the end of September.

Nationwide said this was the biggest fall since April 2009, although it remains well down on the quarterly drops of 5 per cent and 6 per cent recorded during the second half of 2008.

The annual rate of house price growth also declined for the sixth consecutive month, falling to just 1.4 per cent - less than half the 3.4 per cent recorded during the previous month.

The news comes just days after Chancellor George Osborne had claimed a 'recovery' was underway following encouraging economic growth figures.

Gross domestic product was expected to be up just 0.4 per cent but the figures released on Monday showed the economy had performed much better - up 0.8 per cent.

Martin Gahbauer, Nationwide's chief economist, said: 'If the recent trend in house prices were to continue through November and December, the annual rate of house price inflation would drop to between 0 per cent and minus 1per cent by the end of 2010. This would compare to a rate of 5.9 per cent at the end of 2009.'

Mortgage lending remains tight, preventing many people who want to press ahead with a move from doing so.

It remains to be seen what impact the spending cuts announced in the Comprehensive Spending Review will have on the property market, but public sector job cuts could put further pressure on prices in some areas of the country.

Halifax reported that house prices fell by a record 3.6 per cent during September, although the group had reported price rises during the two previous months, when Nationwide recorded a fall.

Figures from the British Bankers' Association released earlier this week showed that net mortgage lending, which strips out redemptions and repayments, has slumped to its lowest level for a decade, as activity in the housing market remained muted.

The fall in prices is good news for some though coming as new research outlines the difficulties facing first-time buyers.

A report by the Home Builders Federation states a typical first-time buyer would have to save every penny they earned for more than two years in order to get on to the housing ladder.

It would take someone in their 20s 27 months to save the average deposit of 24 per cent of a property's value currently being put down by first-time buyers if they had no other outgoings.

Even if young people put off buying a home for five years, they would still need to save 45 per cent of their take-home pay in order to raise a big enough deposit.

The group said a typical first-time buyer needed to save more than £37,000 to buy an average priced starter home but they earn an average of less than half this amount at just £16,400 a year.

Source: ' ThisIsMoney '

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