Fall in prices gives housing market jitters

HOUSE PRICES have fallen for the first time in almost two years, according to new figures that will lead to fresh anxiety for homeowners.

The Nationwide Building Society's house price index showed the average price of a home slipped from pounds 66,654 to pounds 66,171 in August, the first such fall in 20 months.

During August, house prices fell by an average for the country of 0.5 per cent, while estate agents reported more people selling, than buying, in all but a minority of areas.

The figures are the latest in a swath of recent economic data that pointed to an impending recession. Yesterday industry reported a collapse in confidence and a leading union warned 250,000 jobs could be lost unless interest rates were cut urgently.

Rob Thomas, a housing market expert, said: "The underlying trend on just about all the figures we can look at is down. There is quite a severe lack of confidence in the market now. All the steam has gone right out of it."

Nationwide said activity in the market - the number of people buying and selling - was still weak and would stay that way for the rest of 1998.

It blamed the fall in prices on persistently high interest rates and weakening confidence among homebuyers. House prices were likely to be "somewhat less robust" over the coming months, it added.

"It is now clear house price inflation peaked towards the end of 1997, and has been on a modest downward trend ever since."

The biggest slow-down was in the south-east, where house prices have risen by up to 18 per cent since last year. It was most noticeable in London, where, until last month, sellers have been able to get 16 per cent more for homes than in 1997.

Prices have risen more steadily over the year in the West Midlands (5 per cent), the North West (6 per cent) and Wales (2 per cent).

Steve Perry, a housing market expert at Nationwide, said: "What's happened in this recovery is a bit different to previous pick-ups. In the past, prices have taken off in London, and that has rippled outwards.

"What seems to have happened this year is that the ripple has stopped short in the south-east. Prices have been more steady in the north."

Overall, UK house prices are still 9.2 per cent higher than a year ago. The average house, now pounds 66,171, cost pounds 60,581 in August 1997. Nationwide said it would be "very surprised" if prices continued to fall in the coming months.

Economic gloom, page 13