Residential UK property prices are falling by £40 a day as gains made earlier this year are more or less wiped out, the latest figures show.
Average property prices fell 0.3% in November the equivalent of almost £1,000 over the month. This comes on top of a 0.7% slide in October, according to the latest index from Nationwide.
The typical house now costs £163,398, just 0.4% higher than a year ago, after prices fell or remained unchanged every month for the past six months.
The figures, which come just days after the Bank of England reported a further fall in the number of mortgages approved for house purchase, are likely to increase concerns among economists that house prices will suffer a double digit drop during 2011.
Nationwide though said there was no reason to expect the rate at which prices are dropping to accelerate, adding that an anticipated fall in the number of people selling their homes in the coming months was likely to offer some support to prices.
Nationwide also said that its quarter on quarter index, which is generally seen as a smoother indicator of market trends, actually improved slightly during the month. Prices fell by 1.3% during the three months to the end of November, compared with a 1.5% slide during the previous three-month period. This is well above the deeply negative rates of -5% to -6% that prevailed during the most severe phase of the downturn in 2008.
‘There is little evidence to suggest that house price declines are likely to accelerate in the months ahead. Much of the weakness in property values since the spring has been driven by a return of sellers to the market, following unusually low levels of property for sale in 2009 and early 2010. However, there is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest,’ said Martin Gahbauer, Nationwide’s chief economist.
David Newnes, managing director LSL, owners of Your Move and Reeds Rains, said the figures serve to remind people that the picture remains far from rosy in the country’s real estate sector.
‘Although many households are feeling more optimistic about their finances, this is not reflected in the performance of property prices. Given that we’re seeing strong remortgage performance and an above average proportion of cash purchasers, the finger must be pointed squarely at lenders to explain this drop in prices,’ he said.
‘The government tells us that fewer public sector job losses than expected will result from the spending cuts in the New Year, there remain serious doubts among lenders about the viability of buyers with small deposits. It’s also important to remember that despite rates being low the fact that wage inflation is lagging behind price inflation is putting the squeeze borrowers more and more,’ he added.
Catherine Penman, head of research, Carter Jonas, said that a notable improvement in both pricing and sentiment was evident during the first half of the year which has since been counteracted by an increasingly cautionary tone and heavy downward pressure on prices during the second half of the year.
‘This negative pressure is expected to continue with an estimated 5% decline in house prices across the UK expected in 2011 as job losses intensify,’ she added.