House prices fall as market struggles for direction

Click to follow
The Independent Online

Homeowners saw the value of their properties fall in November, the first annual decline for a year, as supply continued to outstrip demand and the market remained "highly mixed".

The average price of a house in the UK fell to £164,708 last month, according to the latest Halifax house price index. The decline of 0.7 per cent in November – measuring the average of the latest three months against the same period a year earlier – was the first annual fall since the previous November.

The figures marked a decline of 0.1 per cent on October, swinging into negative territory after posting a 1.8 per cent rise the previous month.

Martin Ellis, housing economist at Halifax, said: "The highly mixed picture of monthly house price rises and falls recorded this year continued. Such a varied monthly pattern is consistent with a relatively flat underlying trend for house prices."

The current house prices are 2.8 per cent below the peak in January 2010 as the market struggles for direction. Howard Archer, chief European and UK economist for Global Insight, said the latest figures vindicated his belief that house prices would fall 10 per cent from January's peak to £152,536 in 2011. He blamed a combination of factors including high unemployment, muted wage growth, a fiscal squeeze and low consumer confidence for the recent declines.

Mr Archer said: "Critical to the dev-elopment 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."

Yesterday's news followed data from the Nationwide which showed prices fell 0.3 per cent month on month in November over the previous month.

Mr Ellis continued: "Higher numbers of properties for sale, combined with reduced demand, have caused the recent decrease in prices. There are, however, some tentative signs that homeowners are becoming more reluctant to put their properties on the market which, if continued, will help to relieve the current downward pressure on prices."

He was more optimistic over the prospects for the market, saying interest rates were likely to remain very low for an extended period, "which will support the improved mortgage affordability position for homeowners", and added: "As a result, we do not expect to see a significant fall in house prices." Last month's prices remain 6.5 per cent higher than the nadir in April 2009.

The index found that quarter-on-quarter declines continue to grow, hitting a 2.1 per cent fall in yesterday's numbers. Mr Ellis said the three month decline "remains well below the declines of 5 to 6 per cent in the second half of 2008".

Philip Clarke, the managing director of property consultants, Fisher Property Services, believes the market will continue to struggle for direction in the coming months: "In the months ahead, we are likely to see more of the same month-on-month volatility with no definitive trend."

Those looking for properties are still stymied by the lack of availability of mortgages, which has curtailed housing demand. "Even where there is demand, and it does still exist, the problem is a lack of finance. The great mortgage famine shows no sign of subsiding," he said. The Bank of England said in October that mortgage approvals weakened to an eight-month low.

Halifax said the low interest rate environment had reduced the burden of meeting mortgage payments. Typical payments for a new borrower have fallen from a peak of 48 per cent of disposable earnings in 2007 to 29 per cent.