House prices down again as economy disappoints

UK house prices fell 0.7% in July – the fourth decline in five months, according to Nationwide.

This means the price of a typical home is now £164,389 – some 2.6% lower than a year ago.

Robert Gardner, Nationwide’s chief economist, said the recent weaker price trend is ‘unsurprising’ given the disappointing performance of the wider economy as shown by the shock 0.7% GDP contraction during the second quarter of the year.

In fact, against such a difficult backdrop, it could be argued that UK house prices have shown resilience, Gardner said.

‘While prices are currently 13% below their 2007 peak, this is less than the declines seen in a number of other economies that have experienced similar or more robust economic recoveries’.

Gardner puts this down largely to the unexpected strength of the UK labour market, along with a lack of building activity in recent years.

He warned, however, that this pattern of negative growth and steady employment growth cannot be sustained indefinitely and therefore much will depend on the ability of the UK economy to gain momentum.

‘With the Eurozone situation deteriorating again in recent weeks and few signs of a recovery in domestic demand, we continue to expect only a modest recovery in the quarters ahead, both for the UK economy and the housing market,’ Gardner added.

Nationwide's report comes just two days after Hometrack recorded a 0.1% price fall in July. The property website claimed this is the first time prices have come down this year.