Residential property prices in the UK fell 0.7% in October and have now experienced the sharpest three month decline since April 2009, new figures show.
The data from the Nationwide means that the average property now costs £164,381, some 1.4% lower that in September 2009 and 3.4% lower than this year’s peak in June.
It means that the three month figures, often regarded as a more reliable measure than s ingle month’s data, has increased to 1.5%. And if the current rate of decline continues then property prices will end the year down by 1%.
Despite this Nationwide chief economist Martin Gahbauer has described the situations as a ‘modest downward trend’ and also says further quantitative easing could boost the real estate market.
‘This is the largest decline over three months since April 2009, but is still well below the 5 to 6% rates of decline on the three month measure seen during the second half of 2008,’ said Gahbauer.
‘The annual rate of change, which compares the current level of house prices against their level twelve months ago, declined from 3.1% in September to 1.4% in October. If the recent trend in house prices were to continue through November and December, the annual rate of house price inflation would drop to between 0% and -1% by the end of 2010. This would compare to a rate of 5.9% at the end of 2009,’ he explained.
He points out that quantitative easing could have the impact of raising inflation expectations, which in turn could encourage investors to divert more money from cash holdings into property-related assets.
‘The strength of these effects is very difficult to quantify, and it is impossible to say at this stage whether additional quantitative easing would fully offset the various headwinds currently facing the housing market, including the impact of the measures announced in the Comprehensive Spending Review. On balance, however, it is reasonable to expect that a resumption of quantitative easing would provide some offsetting support to the housing market,’ said Gahbauer.
The figures from Nationwide follow a report from the British Bankers Association earlier this week that showed mortgage lending growing at its slowest rate for 10 years and purchase approvals at an 18 month low due to economic uncertainty and first time buyers struggling to find mortgages on terms they can afford.
In a separate report, the Home Builders Federation says that the average first time buyer now needed to save a deposit of just over £37,000 to buy an average priced starter home of £155,000.
‘The latest housing market data and surveys have been consistently weak and the housing market really does not seem to have got much going for it at the moment,’ said Howard Archer, the chief economist at IHS Global Insight.
‘Critical to the development of house prices over the coming months will be the amount of houses coming on to the market, mortgage availability and how well the economy and jobs hold up as the fiscal squeeze increasingly kicks in,’ he added.