Residential property prices in the UK saw an unexpected rise last month but analysts believe it is a blip with the overall trend still falling.
The latest figures from the Halifax show that average property prices increased by 1.8% to £164,919 in October. But this follows a record breaking monthly fall of 3.7% in September.
The Halifax report also shows that the quarterly figure is down 1.2% and this is judged to be a more reliable indicator of what is happening in the real estate market.
Earlier this week the Nationwide reported a monthly 0.7% fall in prices in October and a quarterly decline of 1.5%, the biggest since April last year.
What the figures do show is that the UK property market is in decline and most experts believe prices will either fall or remain stagnated for the rest of the year and into 2011.
Martin Ellis, housing economist at the Halifax, said that all the major house price indices are indicating an underlying slowdown in house prices notwithstanding a divergence in monthly reporting. ‘There has been a very mixed picture of monthly house price rises and falls throughout 2010, which continued in October,’ he said.
‘An increase in the number of properties available for sale in recent months, together with a decline in demand, has put some downward pressure on prices in recent months. We do not believe that prices are set to fall sharply over a sustained period. Interest rates are likely to remain very low for an extended period, which will continue to support the improved mortgage affordability position for homeowners. Low rates and stable employment levels are benefiting homeowners,’ he added.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said that the rise in prices in October was actually the sharpest month on month gain since May 2009 but it needs to be seen in the context of the very weak September figures and the underlying picture is more consistent, with prices continuing to slip on a quarterly comparison and the positive year on year change diminishing.
‘RICS’ forward looking indicators suggest that this softer trend in pricing is likely to continue over the coming months although, if history is anything to go by, supply of properties to the market is likely to drop in this environment. One consequence of such a development is that prices are unlikely to fall very far. More importantly, transaction activity is set to remain at relatively subdued levels,’ he explained.
While Howard Archer of IHS Global Insight said the October rise does not change his view that prices are likely to soften by around 10% by the end of 2011.
‘It is not inconsistent with our view that house prices will trend down gradually overall through the final months of 2010 and during 2011 rather than crash, to lose around 10% of their value. Having said that, there may well be significant volatility around an overall gradually declining trend,’ he explained.