House prices fell at their fastest rate since December 2010 – contracting by 0.5% over the month to November.
House prices are now 2.1% lower in November 2011 compared to a year ago. Dual effects of rising costs of standard of living – encapsulated by consumer price inflation of 5.0% in October and constrained lending in mortgage markets in the wake of the Eurozone sovereign debt crisis have both halted price increases.
Chesterton Humberts/CEBR expect consumer price inflation to ease into next year, providing respite for household disposable incomes in real terms, and therefore shoring up confidence in the housing market. However, the effect of the Eurozone sovereign debt crisis is at this stage unclear, as a fallout in the European banking sector is likely to impact the beleaguered mortgage and credit markets in the UK. On the whole, house prices have behaved surprising resiliently as supply remains weak, but confidence will be tested in the coming months.
Robert Bartlett, Chesterton Humberts’ CEO, comments:
“The economic uncertainly engulfing Europe has begun to affect house prices in London even though the capital was relatively unscathed by the recession and its aftermath. The contraction in financial services has brought a few properties onto the market but for the most part, home owners in the capital are sitting tight and stock shortages continue to be an issue. It is mainly this lack of stock, coupled with continuing international buyer interest, that is maintaining the positive increase in London values.
“The rest of the country continues to experience far more difficult conditions. London is the only region where house prices are higher than a year ago. Country vendors are only seeing buyer interest when they are being realistic in their initial pricing . However, buyers should not be over-optimistic on achieving heavily discounted values as the majority of sellers are not being forced into a sale with interest rates remaining at current levels.”
Douglas McWilliams, Chief Executive of CEBR, comments:
“This month’s House Price Poll of Polls shows what we expected – prices being bid down by prospective buyers who are experiencing rising costs of living, weak job security and tepid wage growth. The Eurozone debt crisis brings about the prospect of stagnant growth in some of the UK’s largest export markets, which has implications for British jobs and confidence in the economy. Indeed, the ongoing uncertainty is likely to affect access to lending as UK banks become more cautious of their overseas debt exposures”.
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