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House prices down 0.3%

House prices down 0.3%

Tuesday, 16 September 2008 12:00 AM

Government figures today confirmed house prices fell 0.3 per cent over the last year.

Data from the Department for Communities and Local Government (DCLG) show the average home was worth £217,171 in July 2008.

However, the figures show a slowing in price falls, with property values down 0.5 per cent in the quarter ending July 2008, comparing to a fall of 1.3 per cent for the quarter ending April 2008.

Across the UK, house prices increased 3.6 per cent in Scotland, but fell in 0.3 per cent in England, 0.8 per cent in Wales and 10.3 per cent in Northern Ireland.

The 0.3 per cent UK drop compares with falls recorded in August by Nationwide of 10.5 per cent and Halifax of 12.7 per cent - partly due to the ways the figures are calculated.

However, according to DCLG, in July alone prices rose one per cent, significantly below a rise of 1.9 per cent in June 2007.

Commenting on the statistics, Howard Archer at Global Insight said: "The month-on-month rise in house prices in July reported by the DCLG is a surprise and at odds with other surveys, even allowing for the fact that the data is not seasonally-adjusted and prices tend to rise markedly in July.

"Indeed, downward pressure on house prices continues to come from extremely weak market activity, stretched buyer affordability and tight lending conditions.

"Consequently, it seems odds-on that house prices will head downwards for some considerable time to come, particularly as lending conditions could well tighten further in the near term at least amid the current turmoil caused by the collapse of Lehman Brothers."

He added a rise in unemployment could also lead to distressed sales and depress prices further.

High employment levels have long been cited as a support for the housing market, even last year when prices were expected only to stagnate.

However, the CBI now predicts unemployment could rise to 2.1 million in the coming year.

"Given these very poor fundamentals for the housing market, it is unlikely that the recently announced government measures to support the housing market will have a significant impact in stabilising activity or prices," Mr Archer said.

He added he expected house price to fall 15 per cent in 2008 and 12 per cent in 2009.

"Consequently, house prices are seen falling 26 per cent in nominal terms from their August 2007 peak of £199,612 on the Halifax measure to stand at £147,478 at the end of 2009," Mr Archer concluded.