House prices will remain flat at best and could fall further by early next year, Nationwide warned yesterday.
Britain's second-biggest building society's half-yearly financial results showed significant improvements, with underlying profits up by 26 per cent to £147m. The group's margins, battered by interest rates held at a historic low since the end of 2008, are also recovering, helped by a 44 per cent fall in bad debts, largely on the strength of a 16 per cent recovery in the commercial property market.
But the outlook for both commercial property and for the domestic sector remains subdued. House prices have been on the slide since July. Although they are up by 1.4 per cent over the year as a whole, the trajectory is firmly downwards, with prices off by 0.7 per cent in October, according to Nationwide's own most recent index.
"We are not expecting anything dramatic in terms of major falls, but we do see a continuing slide to negative over the rest of this year and into next," Mark Rennison, the Nationwide finance director, said.
The key factor is consumer confidence, which is tied tightly to the impact of the Government's spending review and plans to slice £81bn out of annual public spending by 2015.
"The housing market is bumping along the bottom and consumer confidence will be central, driven by the consensus around the outlook for the economy," Mr Rennison said. "The big question mark is the impact of the Government's cuts on things like unemployment, and only into next year will that question start to be answered."
Nationwide's caution was echoed yesterday by the British Bankers' Assocation. The latest statistics from the BBA show that while the annual growth in banks' net mortgage lending was 3.5 per cent last month – substantially ahead of the 0.8 per cent growth in the whole mortgage market in September – gross lending nonetheless came in at a woeful £7.6bn, the lowest level since February 2001.Reuse content