We Know Property

UK house prices fell a further 1.7 per cent in September, according to the latest figures from Nationwide, leaving them 12.4 per cent lower than a year ago – the sharpest annual drop since 1991.

For the quarter ending in September, house prices were 4.6 per cent lower than at the end of the previous quarter.
The latest drop marks the 11th consecutive monthly drop in house prices, but economists at Nationwide took comfort from the fact that the rate at which prices are falling appears no greater than that in recent months.
“The monthly rate of fall has barely changed for the last three months, after accelerating in the first half of the year,” said Fionnuala Earley, chief economist at Nationwide.
However, Howard Archer, economist at Global Insight, took a more gloomy view, noting that the decline was the steepest year-on-year fall since Nationwide began producing monthly numbers in January 1991.
“House prices seem poised to fall substantially further for an extended period as the fundamentals are pretty ugly,” Mr Archer noted.
Lending data from the Bank of England this week showed that net lending for mortgages slowed to a trickle in August, with new loans barely exceeding repayments of capital by homeowners as banks struggle to shrink their balance sheets. With demand for houses so low, economists are widely expecting further price declines.
However, she sought to put the latest decline into historical perspective, noting that housing markets are cyclical. Nationwide has been measuring house prices since the 1950s and has seen several clear cycles.
“One benefit of having such a long-running data series is that we can clearly see that price movements at any particular point in time do not tend to say much about the long run trend,” Ms Earley said.
“Price movements from the peak to a trough of a cycle simply show the extent of the volatility in prices around the trend rather than anything more meaningful about their future path. The long-run trend growth in real house prices in the UK is around 2.7 per cent per annum and there is no reason to expect that over the longer term house prices should not continue to go up in real terms, even if we are going through a sharp correction now.”