House price declines easing off

Published 01st Dec 2010

House prices continued to fall during November, but at a much slower rate than during the property slump in 2008, according to figures released by Nationwide building society today.

The Nationwide house price index showed a drop of 0.3% during November, compared with a 0.7% fall in October. The three month rate of change, which is considered a better indication of trends, also improved slightly from -1.5% to -1.3%, well above the deeply negative price movements of -5% and -6% that prevailed during the most severe phase of the downturn in 2008, said Martin Gahbauer, Nationwide's chief economist.

The annual rate of change, which compares house prices to their level 12 months ago, fell from 1.4% to 0.4%, showing very little change over the year.Average house prices stand 17% below their 2007 peak, much higher than the 31% fall seen three years into the 1990s house price correction. Gahbauer says this is most probably because "real" interest rates, interest after the deduction of inflation, have fallen "dramatically into negative territory", providing more support to mortgage holders.

He added: "There is little evidence to suggest that house price declines are likely to accelerate in the months ahead. Much of the weakness in property values since the spring has been driven by a return of sellers to the market, following unusually low levels of property for sale in 2009 and early 2010. However, there is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest.

"In addition, there are early signs that the flow of new property onto the market may be slowing down again as potential sellers observe the recent weakness in prices and decide against marketing their properties at the current juncture. Similar seller behaviour was observed in late 2008 and early 2009, eventually leading to a decline in the amount of property on the market."

This week the Bank of England revealed the number of approved mortgages had fallen for the sixth consecutive month to 47,185 during October – an eight-month low.Last week the Land Registry reported that house prices fell by 0.8% in October from September, the biggest monthly fall since February last year.

Source: ' Guardian '

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