House prices in June were 6.3% higher on an annual basis as measured by the average for the latest three months against the same period a year earlier. This was below the 6.9% increase in May, which was the highest since October 2007 (8.9%).
Prices are 7.5% above their April 2009 trough despite the modest decline over the past few months. The average house price is now £166,203; 17% below its August 2007 peak.
The increase in the number of properties for sale is curbing the upward pressure on house prices. Estate agents have reported a sharp increase in instructions from new vendors following the recent abolition of HIPs, reinforcing the recent trend as more homeowners have been encouraged to sell following the improvement in house prices in 2009. The ratio of house sales to the stock of unsold properties on surveyors’ books fell for the fifth time in the past six months in May. (Source: RICS monthly survey, May 2010.) The easing in this ratio indicates a moderate loosening in market conditions, reducing the support for house prices.
Housing market activity has eased. Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase – a leading indicator of completed house sales – were largely unchanged between April and May, at a seasonally adjusted 49,800. Approvals in the three months to May, however, were 3% lower than in the preceding three months, indicating a modest softening in housing market activity.
In separate research, Halifax has found that the cost of owning and running a home in the UK has declined by 6% over the past two years. Between April 2008 and April 2010, the average annual cost associated with owning and running a home fell by £544 from £9,564 to £9,020. In real terms (i.e. after allowing for retail price inflation), the cost of housing has fallen by 9%. Housing costs in the UK are now equivalent to 27% of gross average full-time earnings, down from 30% in 2008.
The fall in the cost of housing since 2008 has been driven by a 19% (£881) decline in mortgage payments (interest and capital repayments). The average mortgage rate paid by existing borrowers fell by 2.13 percentage points between April 2008 and April 2010 from 5.80% to 3.67%.
Halifax Martin Ellis said:
"House prices fell by 0.6% in June following a similar decline in May. Prices in the April to June quarter were largely unchanged compared with the first three months of the year. This continued the slowdown in house price growth since the beginning of the year following the moderate recovery in prices during much of 2009. This pattern is in line with our view that house prices will be broadly unchanged over 2010 as a whole.
A shortage of properties for sale in 2009 contributed to an imbalance between supply and demand and was a key factor driving up house prices last year. An increase in the number of properties available for sale in recent months has helped to reduce the imbalance, relieving the upward pressure on prices. The low level of interest rates, however, continues to support housing demand."
Stuart Law, of Assetz said:
“The latest Halifax data shows the UK housing market is pausing for breath following the huge increase in house prices since April last year. This should not be read as prices reversing however but reflects a period of uncertainty for buyers in the market last month in the weeks post election and pre-emergency budget.
“We still fully expect a modest 5% overall growth for 2010 for the UK as a whole as house price inflation slows whereas the Halifax expects flat prices in the part of the market it serves. The market was already up 2% this year by May and we expect a little further growth in the second half of 2010.”
Nigel Lewis, at FindaProperty.com said:
“It is no surprise that the latest Halifax house price index shows a dip in house prices; our own figures show that there has been an influx of stock over the past few months which has served to drive prices down. There are currently 23% more properties for sale on our site than there were a year ago and this imbalance between supply and demand is now affecting pricing.
“We are reverting back to a buyer’s market and therefore sellers must vie for their attention with more competitive prices.”
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