House prices drop for fourth month running

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The Independent Online

House prices continued to slide last month with the sharpest three-monthly decline since April 2009, Nationwide said yesterday.

Prices fell by another 0.7 per cent in October – following a stagnant September and drops of 0.9 per cent in August and 0.5 per cent in July – and if the current rate of decline continues annual housing market inflation could end 2010 down by 1 per cent. Even the smoother three-monthly figure showed a 1.5 per cent drop. And the average price is now £164,381, some 1.4 per cent lower than in September 2009 and 3.4 per cent lower than the market peak in June this year.

The muted figures from Nationwide follow a report from the British Bankers' Association earlier this week showing mortgage lending growing at its slowest rate for 10 years and purchase approvals at an 18-month low thanks to economic uncertainty and first-time buyers struggling to find mortgages on terms they can afford.

"Latest housing market data and surveys have been consistently weak, and the housing market really does not seem to have got much going for it at the moment," Howard Archer, the chief economist at IHS Global Insight, said yesterday. "Critical to the development of house prices over the coming months will be the amount of houses coming on to the market, mortgage availability and how well the economy and jobs hold up as the fiscal squeeze increasingly kicks in."

Although the Office of National Statistics this week published third-quarter GDP figures showing growth at 0.8 per cent – twice the level economists were predicting – the housing market is not the only sector showing signs of strain.

Yesterday's GfK NOP Consumer Confidence Index for October may record a one-point gain, but the index is still at a woeful minus 19, six points lower than this time last year. Confidence in the health of the economy over the coming 12 months dropped by a point to minus 43.

"The small rise in consumer confidence is really only the prelude to what happens next," said Nick Moon, the managing director of GfK NOP Social Research.

"Confidence has remained reasonably consistent since June but this could change as the public comprehends the full impact of the Government's cuts."