House prices drop 0.6% despite higher average cost

Nicky Burridge,Press Association
Sunday 23 October 2011 08:31

House prices in England and Wales fell for the first time in 11 months during March, dropping by 0.6%, figures showed today.

But the average cost of a home was still 7.5% higher than it had been a year earlier at £164,288, according to the Land Registry.

The figures contrast with ones reported by Nationwide yesterday, which showed that house prices rose by 10.5% during the year to the end of April and by 1% during the month itself, although the group had reported a 1% dip in property values during February.

The Land Registry figures tend to lag other indexes, but they are still likely to stoke concerns that the housing market recovery is running out of steam.

The mismatch between supply and demand, which has been the key factor driving prices higher, appears to be easing, as more people put their homes up for sale and the rise in demand from potential buyers slows.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "We remain dubious that house prices can make significant gains over the coming months.

"Housing market activity appears to have lost some momentum overall so far in 2010. The economic fundamentals are still far from robust for the housing market, credit conditions are still pretty tight, and house price/earnings ratios have moved back up.

"Consequently, we believe that house prices are likely to be erratic over the coming months and may well be only flat overall through the rest of the year."

There was a mixed picture for house prices across England and Wales during March, with only three regions posting price gains.

London and the North East led the way with increases of 1.6%, while prices rose by 0.2% in the East.

At the other end of the scale, prices dived by 2.1% in the East Midlands, while they dropped by 1.2% and 1% in Wales and the West Midlands respectively.

On an annual basis, growth was strongest in London at 13% and the South East at 11.5%, with the East also posting double digit gains of 10.3%.

But prices in Wales are only 1.1% higher than they were a year ago, while the North West, Yorkshire and the Humber and the North East saw gains of between only 2.5% and 2.9%.

The number of homes changing hands dived sharply during January, the latest month for which figures are available.

Only 34,171 transactions were completed during the month, less than half of December's level of 76,072.

The figure is likely to have been distorted by people rushing sales through in December to beat the end of the stamp duty holiday on lower value properties.

But January's figure was still the lowest since February last year, although it was 30% higher than in January 2009.

The number of properties sold for more than £1 million more than doubled during the year to 436 in January from 181 12 months earlier.

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