House prices continue to fall, says Nationwide
House prices started 2011 as they finished 2010, according to the latest figures published by the Nationwide Building Society.
Prices slipped by a seasonally adjusted 0.1 per cent last month following the December fall of 0.4 per cent. That was, in truth, less than the 0.4 per cent drop that economists had expected but nonetheless continues the downward trend that has been apparent since the middle of last year. It also left house prices down 1.1 per cent compared with the level they reached in January 2010.
The Nationwide figures painted a similar picture to other surveys, all of which have been showing a continued gentle decline in prices.
Robert Gardner, Nationwide's chief economist, said they showed the property market entered the new year "with a whimper rather than a bang".
He said: "January's data does little to alter the picture of a sluggish market that has been evident since the summer. Indeed, the three-month on three-month measure of house prices, which is a better measure of the underlying trend, showed a fall of 0.5 per cent, consistent with the gradual moderation in prices that has been in place since the summer of 2010."
Part of the fall in prices has been put down to the continued difficulty consumers face in finding mortgages. But economists also point to a marked lack of confidence among consumers, who are faced with falling wages at a time of relatively high inflation combined with insecurity about their jobs, particularly if they work in the public sector. That comes as a direct result of the Coalition's austerity drive, which is facing mounting criticism for going too far, too fast and endangering Britain's fragile economic recovery.
Looking at the outlook for prices over the coming months, Mr Gardner said it remained "highly uncertain".
"But the most likely outcome is that the pattern of low transaction levels and prices moving sideways or modestly lower will continue through 2011," he said. "Demand for homes looks to have stabilised, albeit well below the levels prevailing before the crisis. Interest rates remain at historic lows, and labour market conditions have stabilised – both factors that will provide support to the market. However, the continued uncertain outlook for the economy will probably continue to keep many buyers on the sidelines."
Mr Gardner did at least say there was no sign of a glut of unsold homes building up on the market that would lead to a sharper price correction.
Nida Ali, a senior economic adviser to the Ernst & Young Item Club, said the figures presented a "dismal picture" of an already falling market.
"Though survey data suggests that the rapid increase in housing supply is starting to unwind, these figures imply that the level of demand remains very depressed, so house prices are likely to continue falling well into 2011," he said.
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