UK house prices down in July by 0.7% as market mirrors weak economy
02-08-2012
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Its July index shows that the price of an average house in the UK is now £164,389 and prices have now fallen for the fourth time in five months, the weakest run since August 2009.
However, Robert Gardner, Nationwide's chief economist said that the weaker price trend observed in recent quarters is unsurprising, given the disappointing performance of the wider economy.
‘Data released last week revealed that the UK recession intensified in the three months to July, with the economy contracting by 0.7% quarter on quarter. This disappointing out turn can be only partly explained by unusually wet weather and the impact of an extra bank holiday during the quarter. Indeed, the UK economy has contracted by 1.4% over the past nine months, and is now 4.5 percentage points smaller than it was in the first quarter of 2008,’ he explained.
‘Against this difficult economic backdrop, it could be argued that UK house prices have shown resilience. 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,’ he added.
According to Peter Rollings, chief executive officer of estate agent Marsh & Parsons, it is only a shortage of properties available that is preventing larger falls in many parts of the country.
‘Mortgage lending figures are still heading south and lenders’ conservatism is being felt most keenly by first time buyers. This is keeping the lower tiers of the housing market sedated, removing the bottom up impetus needed to drive a recovery in prices outside of London,’ he said.
‘It’s not yet clear whether the funding for lending scheme will serve as a much needed shot of adrenaline for the housing market. The prospect of the scheme has already triggered a wave of incredibly cheap rates for the equity rich, and those with substantial deposits are reaping the benefit. If we see these cheaper rates applied to higher loan to value mortgages following the scheme’s launch, we could see a bounce in first time buyer figures, buoying sales activity in the second half of the year,’ he added.
