On an annual basis, prices in January were 2.4% lower as measured by the average for the latest three months against the same period a year earlier.
The latest RICS survey, for example, reported a decline in new seller instructions for the third successive month in December. A continuation of this trend would help to reduce the imbalance between demand and supply and support house prices.
The number of home sales in the UK increased by 4% from 846,000 in 2009 to 884,000 in 2010, according to the latest HMRC figures. Despite this modest improvement, sales remain very low historically and are just over half the annual levels of 1.6-1.7 million in 2006 and 2007.
Bank of England industry-wide figures showed a 10% decline in the number of mortgages approved to finance house purchase – a leading indicator of completed house sales – between November and December on a seasonally adjusted basis. These figures, however, are difficult to interpret due to the unusually severe weather in December, which is likely to have reduced the level of approvals in that month. Similarly, the 28% fall compared with December 2009 is significantly affected by the ending of the stamp duty holiday on properties between £125,000 and £175,000 at the end of 2009, which boosted the number of approvals during the last few months of that year.
Commenting, Martin Ellis, housing economist, said:
"Prices in the latest three months were 0.7% lower than in the previous quarter, continuing the slight downward trend on this underlying measure. House prices increased by 0.8% between December and January.
"We expect limited movement in house prices overall this year. There are, however, likely to be some monthly fluctuations with the risks on the downside. The prospects for the market in 2011 are closely aligned with the performance of the wider economy. Consumer confidence has fallen recently, partly as a result of nervousness about the economic outlook.
"On a positive note, there have been further signs that the recent downward trend in prices is causing homeowners to be more reluctant to put their properties on the market. This development should help to relieve downward pressures on prices as long as it is sustained. We also expect interest rates to remain very low for some time, supporting a favourable affordability position for many existing mortgage borrowers and those entering the market."
Peter Rollings, managing director of Marsh and Parsons, said:
“Halifax’s latest figures point towards a positive start to the year for the housing market. This nationwide bounceback has been largely driven by the frustrated demand of buyers in December, whose house-hunting was delayed by Christmas and the onset of arctic weather conditions. This positive news does reflect what’s happening in London, where strong house prices have been underpinned by increasing levels of activity in January – the real barometer of the market’s health. Our offices have seen a very busy start to 2011, buoyed by strong demand from UK and international investors – and those top-tier buyers hoping to buy before the stamp duty hike in April. With the ongoing strength of demand for prime property, we expect prices and activity in the capital to continue its trend of improvement over the course of the year. However, any sustained nationwide recovery is much more dependent on the strength of the wider economy, and an increased availability of affordable mortgages for first-time buyers. At present, there simply aren’t enough achievable deals on the market for first-timers to generate a persistent improvement in the UK housing market.”
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