View the article online at http://citywire.co.uk/money/article/a418204
House prices: Nationwide reports first drop since February
Nationwide has reported a 0.5% drop in the price of an average UK property, adding to evidence that prices are heading lower.
House prices have fallen for the first time since February, according to figures from Nationwide.
The building society had reported stalling prices in previous months, but its July numbers shows that prices actually dropped by 0.5%, as the glut of properties is not met by demand.
‘So far in 2010, demand from homebuyers has made little progress in building upon the recovery seen during much of 2009. Despite the introduction of a second stamp duty holiday for the vast majority of first time buyers and record low interest rates, the number of properties changing hands across the UK is still running at only half the levels seen prior to the financial crisis and recession’, Martin Gahbauer, Nationwide's chief economist, said.
Gahbauer pointed to last week’s surprisingly strong reading of GDP as reason for cheer at a time when the economic uncertainty is putting off potential home buyers. However, he added that concerns about the government’s cost-cutting measures would have a bigger influence on buyers’ confidence.
Nationwide partly attributes the increased number of sellers onto the market – which had until recently been matched by buyers – to the coalition government’s abolition of Home Information Packs. This has encouraged more speculative sellers onto the market. The mass of ‘accidental landlords’ created by the previous downturn in prices, those people who were forced to let out their homes while they ride out the troughs, are also contributing to the mis-match in supply and demand.
What do others say?
The broad pattern has shifted from a flattening of the housing market towards a slight fall in prices. Halifax has not yet reported its July numbers, but according to the bank house prices fell for the third straight month in June, dropping another 0.6%.
Land Registry, which lags the other indices, had shown a fall in house prices in May but then surprisingly yesterday reported a very slight increase (0.1%).
‘It will take several more months to establish whether house prices are now simply oscillating around a flat price trend or whether a period of downward trending prices may be in store,’ Gahbauer said today.
Others have been more extreme in their views. Accountants PriceWaterhouseCoopers have predicted that UK house prices are unlikely to reach their pre credit crunch peak for five, possibly ten years.
While yesterday the National Institute of Economic and Social Research predicted that prices will fall, in real terms, by about 8%.
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