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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: Nationwide reports first drop since February

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.

More sellers

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%).

What next?

‘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%.

15 comments so far. Why not have your say?

Dislexic Landlord

Jul 29, 2010 at 09:00

For what its worth I think House prices will fall they cant do anything else no mortgages and goverment cut and umemployment or the fear of loseing a job

I foe one will be buying there is an old saying when you see the boom you have missed it

So my advice is buy buy buy now in the long term property will rise and rents too

Im as thick as they come and im makeing money

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mark douglas

Jul 29, 2010 at 09:48

Over the last year you had to be thick as they come to have made money or it was by accident. (in property) Being thick certainly would have helped from 2005 to 2007 as well.

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Jul 29, 2010 at 09:55

In the long term property is a bad bet. The last 15 years were an aberration but a good opportunity to make money (I did). The next 15 years will be a good chance to lose it (I won't). Look at the long term fundamentals if you want long term investments.

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Jul 29, 2010 at 09:56

The price bubble has burst. Sorry for those with negative equity but I welcome a fall. Not having to fund a ridiculously overpriced mortgage for most people means more money for savings, spending and investment which is what the country needs. In any case taxing capital gains on residential property like they do in most other countries must be a tempting target for the chancellor. People need to stop seeing their homes as an easy way to make money.

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Jul 29, 2010 at 10:07

Just wait until rates go up (early next year?). That will sort the men from the boys: reposessions will rise, prices will fall !

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Rajah Brookes

Jul 29, 2010 at 10:37

I'm with the bunny! It is an extraordinary oversight that an article on potential snakes and ladders for the property market fails to mention the giant wrecking ball waiting in the wings. Prices are falling now...and interest rates are at 0.5%. They can't go down...they can only go up...and maybe sooner rather than later. I know people that are taking on mortgages now at 4-5 times salary multiples commenting that it is cheaper than renting. Let's see how they feel when their payments double.

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Anonymous 1 needed this 'off the record'

Jul 29, 2010 at 10:48

I have to agree with phildoc. The UK's obsession with home ownership has meant that for years people have been piling money into property, reducing their overall disposable income. Spending has been funded by borrowing against property, leading to - well, I think we all know the story by now. A reduction in house prices might in the long term lead to a higher standard of living as disposable income increases, finding its way into other forms of investment and into the economy in general. As for the capital gains tax exemption, I've never understood why this is held to be so sacred. It is, after all, a tax on a gain. It would make more sense to abolish stamp duty on property purchases and to apply capital gains tax to sales.

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Terence Dale

Jul 29, 2010 at 11:19

The worm has turned, it is now more sensible to rent than buy,why?House prices have started their long overdue correction(fall).

The average house price is now falling £100 per day, £700 per week,or £3010 per month (1month=4.33weeks). Providing you are paying a rent less then the average house price fall in your area then you are ahead. My wife and I sold up in 1989, we waited to the bottom of the market and paid cash for the property we sold in 2007.It is a no brainer,but, it is in the British head,mind set and DNA that you must get on the housing ladder. A very succesful property developer once told me, where property is concerned common sense and judgement just does not exist.This current downturn will last at least 10 years or perhaps even longer.

Reply Terence Dale

Joined: 16 06 2009

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Anonymous 2 needed this 'off the record'

Jul 29, 2010 at 14:40

It is true British people have an obsession with home/house ownership, I believe it's part of our culture, will that change in the near future (50 years), I don't think so. Look at the amount of interest an article like this gets as opposed to an article on, let's say, pensions.

Given this I don't think house prices will fall too much, esp. in London and South East England - A lot of people still aspire to live there and own their own properties. The squeeze on mortgages seems to be a return of the days when one had to save with the BS before it would lend any money to you, remember that? Inflation of the next few years will certainly bring down the real value of property, but then where else would you be willing to put your money... cash deposits pay next to nothing; Gold, maybe but it has already risen a huge amount in recent years; Equities, again may do well but then again may not, look at the past 10 years of negative growth.

For me, I will be a buyer of properties, if I can get the right property at the right price, I already rent a number of properties and hope to expand the business. The rental income affords me not to work and live in the Caribbean, as long as I can make almost cash purchases I see the whole thing of house ownership and renting, which is bouyant at the moment, as a no-brainer.

It depends on why you want to buy property as to whether this is a good time or not ...

As a home to live in ... If you see a property which you reallly like and could see yourself there fpor 10 years or more, then BUY it - tomorrow it won't be available.

As an investment with Capital Appreciation over the short term (up to 10 years) do NOT BUY it.

As an invetment withe CA over the long term (20 years +) BUY it.

As an income provider for the long term - BUY it.

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shaon mukherjee

Jul 29, 2010 at 14:53

we will be out of this buy 2015

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Anonymous 3 needed this 'off the record'

Jul 29, 2010 at 15:50

Dislexic Landlord,

You really make me laugh with your comments and we must be from the same school except maybe I can spell... I was the dunce with only 1 O' Leven (in Maths)

Anonymous 2,

I agree with your very sensible comments and was in the BTL market for 8 years from 1999 after selling up my Investment Trust warrants after making a great gain.

As you say making nearly cash purchases is the way to go when buying BTL properties these days, less to worry about if the BOE change their mind and start hiking rates sooner than some buyers seem to think.

For me, I have varied my investments over the years and still don't have any properties in the UK since selling up. I held equities a few times in the 90's, put all on deposit into US Dollars when I sold up the houses and did well with the exchange rate (that was more luck than anything though). Now I am easing my cash back into equities on a monthly basis but am prepared to hold them for a long time as I do not see a second consecutive decade of share price and commodity falls. Who can tell though, it is down to both good judgement and luck to make a decent return on one's investments.

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Anonymous 3 needed this 'off the record'

Jul 29, 2010 at 15:51

ha ha maybe i cannot spell after all, O' level (not O' leven) getting late where I am based, that's my excuse anyway

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Terence Dale

Jul 29, 2010 at 17:27

Forgot this on my earlier comment. BTL use to be an acronym for 'Buy To Let'

now stands for 'Buy To Lose'.

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Anonymous 3 needed this 'off the record'

Jul 29, 2010 at 18:22

Oh my mortgages must have been BTW then Terence.

However, I preferred 2 others:

STA = Speculate To Accumulate

JOB = Just Over Broke

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Anonymous 4 needed this 'off the record'

Aug 10, 2010 at 12:13

So what if prices fall, they've been over inflated for years.

A house should be a home first and foremost with any 'investment' value coming by way of modest increases in line with earnings over a long period of time.

That way, up and coming young folks could find them affordable.

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