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Hometrack: Prices to fall 0.2% in November

Hometrack: Prices to fall 0.2% in November

Monday, 26 November 2007 12:00 AM

The average house price in England and Wales are expected to fall by 0.2 per cent during November, according to the latest figures from analysts Hometrack.

This marks the second consecutive monthly fall, with prices showing a 0.1 in dip in October, and provides further evidence of a slowing market.

Consequently annual house price growth is now at the lowest level for 16 months, having fallen to just 3.4 per cent.

This is down from 4.4 per cent in October and five per cent in September.

Hometrack also recorded several other indicators of a slowing market.

The average property now takes eight weeks to sell, up from 7.4 weeks in October, and only marginally behind the five year high of 8.1 weeks recorded in early 2006.

Only 93.8 per cent of properties are expected to achieve their asking price in November - a two year low.

According to Hometrack demand has been curtailed by a continued tightening of lending criteria, along with increased affordability pressure and modest improvements in average incomes.

Higher interest rates in the past 12 months have also played a part.

First-time buyers are facing hard times as affordability continues to deter purchasers, while potential sellers are increasingly unwilling to do so due to concerns over a major correction in prices in the coming months.

Specific to London, a fall in City bonuses and salaries could cause further falls.

"Slowing housing demand is expected to steadily feed through to dampen house prices over the coming months. Consequently, we expect annual house price inflation to fall back markedly over the next few months," said Hometrack.

"Further out, we think it is most likely that house prices will essentially flatline for an extended period. Even so, this would still represent a fall in house prices in real terms and modest nominal falls in prices are highly possible."

However, house prices are likely to be supported by a shortage in supply - with high employment and a strong economy reducing the number of distress sales made.

"Nevertheless, there is undeniably a very real risk that the housing market could see a sharp correction. Probably the biggest risk is that the economy slows sharply over the coming months and unemployment starts rising significantly.

"This would be liable to lead to a marked increase in the number of people having to sell for distressed reasons, particularly given the extent to which many households have had to stretch themselves to the limit to buy a house," concluded Hometrack.