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November house prices edge down further

Commenting on the figures Martin Gahbauer, Nationwide’s Chief Economist, said:

“The recent trend of modestly falling house prices continued during November, with the price of a typical UK property declining by 0.3% on a seasonally adjusted basis between October and November. The three month on three month rate of change – a smoother measure of the recent price trend – rose from -1.5% to -1.3%. This remains well above the deeply negative rates of -5% to -6% that prevailed during the most severe phase of the downturn in 2008. The annual rate of change – which compares house prices to their level 12 months ago – fell from 1.4% to 0.4% and suggests that house prices are essentially unchanged from a year earlier.

There is little evidence to suggest that house price declines are likely to accelerate in the months ahead. Much of the weakness in property values since the Spring has been driven by a return of sellers to the market, following unusually low levels of property for sale in 2009 and early 2010. However, there is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest. In addition, there are early signs that the flow of new property onto the market may be slowing down again as potential sellers observe the recent weakness in prices and decide against marketing their properties at the current juncture. Similar seller behaviour was observed in late 2008 and early 2009, eventually leading to a decline in the amount of property on the market."

Peter Rollings, managing director of estate agent Marsh & Parsons, said:

“Nationwide’s statistics paint a gloomy picture for the UK’s housing market when contrasted to the sharp gains in prices we saw earlier in the year.  But there is scant evidence that we will see a ‘double dip’.  While annual house price growth is slowing, in part suppressed by the increased stock available on the market, it is still positive.  Nationally, the key issue remains mortgage finance. The freeze in lending is still keeping thousands of first-time buyers out in the cold, and this must be addressed to re-ignite the recovery in most parts of the UK.  But London continues to outperform the rest of the country, and should be seen as a separate market in its own right. The resurgence of the prime market, and the buoyant demand from both overseas and UK cash-buyers – unaffected by adverse mortgage conditions – has meant that activity and house price growth has remained robust in the capital. And with the City continuing to recover, and bonus season on the way, we anticipate that the sale price of London properties will remain strong in coming months – as many City workers take advantage of the increased choice of properties due to come on the market in the New Year.”

Estate Agency MD David Newnes of LSL, owners of Your Move and Reeds Rains said

“Following the government’s upbeat assessment of the economy on Monday, these figures from Nationwide will serve to remind people that the picture remains far from rosy.  Although many households are feeling more optimistic about their finances, this is not reflected in the performance of property prices. Given that we’re seeing strong remortgage performance and an above average proportion of cash purchasers, the finger must be pointed squarely at lenders to explain this drop in prices.  The supply of property coming onto the market surged after the abolition of HIPS back in May and property stock relative to the number of buyers has since remained high.

“Some basic supply and demand economics are also at play here.  90% loan-to-value mortgages remain extremely difficult to obtain, especially for first time buyers, whose numbers remain subdued and I don’t see this changing in the near future. Lenders are understandably cautious about high LTV mortgages. They have had their fingers burned before. With house price forecasts in decline along with lenders’ collective requirement to repay the government £300bn by 2014 it isn’t suspiring that they are only providing high percentages of purchase price to blue-chip buyers.

“Although the government tells us that fewer public sector job losses than expected will result from the spending cuts in the New Year, there remain serious doubts among lenders about the viability of buyers with small deposits.  It’s also important to remember that despite rates being low the fact that wage inflation is lagging behind price inflation is putting the squeeze borrowers more and more."

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