Residential property prices in the UK have fallen five times in seven months as the latest figures from the Nationwide show they decreased by 0.1% in January. Lending to buyers is also down; to the lowest levels since Bank of England records began.
The outlook for 2011 is gloomy with the sales market expected to stagnate and lending predicted to stay low.
The average price of a house is now £161,602, down from £162,763 in December 2010 and on an annual basis prices are down 1.1%.
The Bank of England figures show that net mortgage lending, after repayments, was £8.15 billion in 2010, down from £11.3 billion in 2009. December, net lending shrunk by £298 million as homeowners repaid more than they borrowed, only the third time this has happened since records began in 1993.
The Council of Mortgage Lenders has predicted that net lending will drop even further to £6 billion this year. Activity in the mortgage market remains subdued, with the number of mortgage approvals falling by 10% in December to 42,563, the lowest level since March 2009.
‘Even allowing for the fact that the severe weather likely hit mortgage activity in December, the Bank data point to a housing market stuck in the doldrums. We maintain that house prices will fall by around 10% from their peak 2010 levels by the end of 2011,’ said Howard Archer, chief UK economist at IHS Global Insight.
According to Robert Gardner, Nationwide’s chief economist, the property market will remain sluggish. ‘The outlook is still highly uncertain, but the most likely outcome is that the pattern of low transaction levels and prices moving sideways or modestly lower will continue through 2011,’ he said.
‘The continued uncertain outlook for the economy will probably continue to keep many buyers on the sidelines. At the same time, there are few signs of a glut of unsold homes building up on the market that would lead to a sharper price correction. Indeed, there are tentative signs that the volume of homes coming onto the market may be slowing,’ he explained.
Nick Hopkinson, director of property company PPR Estates, believes that the traditional spring thaw will not happen as the mortgage famine drags on. ‘When even the mortgage sellers are claiming activity is subdued in their market surveys then you know things are really bad,’ he said.
‘A variety of well publicised factors will keep house prices under pressure this year including poor consumer confidence crashing at the moment, rampant inflation, concerns about future interest rates, the impact of the austerity cuts and worries over jobs,’ he added.