House price stagnation creeps North

The stagnation of the housing market in the South-east of England may be spreading into the North, the latest survey of house prices suggests.

The stagnation of the housing market in the South-east of England may be spreading into the North, the latest survey of house prices suggests.

The monthly survey of estate agents by Hometrack, released today, shows average UK house prices dipped 0.1 per cent in May, their second consecutive month-on-month fall. The annual rate of house price inflation has slowed to 8 per cent. While it still expects a modest rebound in the next few months, Hometrack has put its forecast of 4 per cent house price inflation this year under review.

The UK average has long masked a sharp distinction between falling prices in parts of the South and the continuing boom in the North of England, the May survey shows a quarter of northern counties saw no month-on-month price inflation. The biggest rises were in Tyne and Wear, several areas of Wales, and Staffordshire, where prices rose 0.5 per cent on the month. But in Surrey the average price of a home was 0.7 per cent lower than a month ago.

The number of properties for sale has continued to increase, but demand fell again in May. Prices achieved, measured as a percentage of the asking price, fell for the eleventh month in a row and sellers can now expect just 94.4 per cent of their asking price.

Hometrack has been one of the more bearish forecasters of the housing market, seeing average UK inflation of just 4 per cent over 2003. John Wriglesworth, Hometrack's housing economist, believes that the market may be bottoming out, but will need a swift rebound in the coming months if his forecast is to be met.

Mr Wriglesworth said: "Price falls in the South have stopped increasing, though price rises in the North are showing signs of easing. With the Iraqi war over, there are some signs of increasing housing activity, which will help support house prices in the latter half of the year."

He added that historically low fixed-rate mortgage deals may also tempt buyers back, but activity in June and July was now crucial if prices are to regain their upward momentum.