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House prices drop- Nationwide

Thursday, 30 April 2009 2:54 PM

House prices fell by 0.4 per cent in April, despite optimism in March the housing market was beginning to recover.

The Nationwide House Price Index (HPI) released today, found the average price of a home is now £151,861, with the building society saying housing measures announced in the Budget were "unlikely to turn things around".

The price of a house is now 15 per cent less than it was a year ago.

Simon Rubinsohn, Royal Institution of Chartered Surveyors (Rics) chief economist said: "The resumption of a downward trend is not a surprise and broadly consistent with the main indicators contained in the Rics monthly Housing Market Survey.

"A key risk to this view remain the weak performance of the economy but even with unemployment set to rise further, new supply onto the market is likely to remain constrained as potential distressed sellers avail themselves of the various government programmes to remain in their property. More positively, measures announced in the budget particularly on improving the flow of mortgage finance could help first-time buyers to enter the market in a more meaningful way."

Nationwide also welcomed housing market changes in the Chancellor's Budget; particularly the extension of the stamp duty threshold, which they say will encourage first-time buyers, who will benefit from low house prices.

However, the building society said the government could have done more to aid the availability of credit. Fionnuala Earley, Nationwide's chief economist, said: "The chancellor announced several measures aimed at boosting the housing market in his Budget.

"The scheme for government guarantees for new, high-quality residential mortgage backed securities are welcome and may help to boost the amount of mortgage credit available. However, since the availability of credit is only part of the reason why the housing market is in the doldrums it is unlikely to lead to a swift turnaround in its fortunes.

"Lenders have already indicated that the availability of credit is less of an issue than it has been, but at the same time expect that the demand for secured lending will fall further. Given the weakness of the economy and the expected further increase in unemployment this comes as no surprise."

Ms Earley added that the effects of unemployment would contribute to the housing market recovery. She said: "The housing market is very sensitive to income and, as a result, conditions in the labour market are crucial to its performance.

"That said, the correction in house prices and improved affordability conditions provide a good grounding for the market once domestic and global economic conditions once again become more favourable."

The Land Registry also published their HPI today, with figures for March in line with the Nationwide HPI for the month. House prices fell by 0.4 per cent, with the average house price at £152,895. The registry found the average price of property in London fell by 15.4 per cent, although the monthly house prices increased by 0.6 per cent in the capital.

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