"Approvals were at their highest level since April 2008 and 10% higher than a year earlier.
"Improvements in affordability and low interest rates have stimulated housing demand. This, together with a low level of properties available for sale, has helped to stabilise activity and reduce the underlying rate of house price decline in recent months.
"Whilst there have been encouraging recent signs of improvement, the outlook for the UK economy remains uncertain with unemployment set to continue rising for sometime. Overall, we expect to see a continuing mixed pattern of monthly house price rises and falls over the remainder of 2009."
June’s 0.5% decline fits with the mixed picture of monthly rises and falls so far this year and contrasts sharply with the consistent succession of significant monthly declines recorded in 2008.
This indicates that the underlying rate of decline in house prices has eased.
House prices declined by 1.9% in Quarter 2 – the smallest quarterly fall since 2008 Quarter 1 and was significantly less than the 5-6% declines in the last three quarters of 2008. The UK average price has returned to where it was five years ago in 2004 Quarter 2 (£157,091).
House prices in June were 15.0% lower on an annual basis. The annual rate of change (measured by the average for the latest three months against the same period a year earlier) improved for the second successive month and compares with -17.7% in April. The annual rate of decline is at its lowest since November 2008.
Tighter supply/demand balance has helped to support activity and prices. Increased demand, combined with a low level of properties available for sale, has helped to stabilise activity and reduce the underlying rate of house price decline in recent months. The ratio of house sales to the stock of unsold properties on surveyors’ books rose for the fifth consecutive month in May, indicating a tightening in market conditions, according to the latest RICS monthly survey.
Lower interest rates have boosted affordability. Monthly repayments accounted for an estimated 21.6% of average gross household income in June 2009 for existing mortgage borrowers. This compares with a peak of 26.9% in October 2008 and is the lowest proportion of income devoted to mortgage repayments since mid 2004. The decrease in the average mortgage rate paid by existing borrowers from 5.82% in October 2008 to 3.59% in May 2009 is the main driver of this reduction. The long-term average for income accounted for by mortgage repayments is 20.4%.
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