Casa Blog – UK Property Search

House prices fell for the third month in a row during January, according to the latest survey from the Nationwide.

The building society said prices dipped 0.1% during the month, taking the average cost of a home to £180,473.

The annual rate of price growth dropped to 4.2%, which is the lowest rate since December 2005.

Meanwhile, on the three month on three month measure - seen as a more reliable indicator of the health of the market - prices had declined 0.3%.

The group’s figures come during a week that has seen a host of gloomy data reported on the housing market.

The Bank of England on Wednesday, said the number of mortgages approved for people buying a home fell to its lowest level since July 1995 during December at only 73,000.

The figure, which was 10% down on November’s approvals and below analysts’ expectations, suggests that the current slowdown could pick up pace as mortgage approvals take some time to work through into house price changes.

Earlier this week the Land Registry said house prices in England and Wales fell by 0.4% during December, the first drop it has recorded since August 2005, while the Financial Services Authority (FSA) said more than one million mortgages are a “cause for concern” because of their riskier lending characteristics.

There is now little doubt that the housing market is slowing down, with all the major indexes reporting price falls on a monthly basis as stretched affordability and tighter lending criteria from mortgage lenders deter potential buyers.

Martin Gahbauer, Nationwide’s senior economist, said: “The weakening trend in house prices during the last three months is consistent with the loosening in housing market conditions that has become increasingly evident in the data.”

“Key indicators such as mortgage approvals and the sales-to-stock ratio have now fallen close to or even below the troughs reached in late 2004, a period that was followed by a year of very subdued price growth. This undoubtedly signals a continued cooling in annual house price inflation during the months ahead.”

House prices declined for a fourth month in January according to the latest survey from Hometrack, the housing market research company.

The average cost of a home in England and Wales fell by 0.3%, the same rate as in December, to £174,700.

The annual rate of growth also continued to fall, easing to just 2.3% in January, down from 3.6% in December and the lowest level since June 2006.

Meanwhile, the number of new buyers registering with estate agents continued to fall, dropping by 11.5% during the month, following falls of 7.9% and 9.1% in December and November respectively.

There was also a shortage of homes coming on to the market, with 4.6% fewer properties put up for sale than during the previous month, causing levels to be 10% lower than six months ago.

Unsurprisingly, the lack of activity in the market led to an increase in the amount of time a home takes to sell to 8.5 weeks, the highest level since the survey first began in 2001, with homeowners now getting just 93.5% of their asking price, down from around 96% a year ago.

However, the extent of price falls decreased with agents reporting prices down across less than a quarter (23%) of the country, compared to 31% in December.

Richard Donnell, Hometrack’s director of research, said: “Weak confidence among would-be purchasers continues to put downward pressure on house prices although the scale of the recent falls is relatively small when put in the context of gains over the last few years.

“Underlying prices are still being supported by a continued tightening in the supply of homes for sale, a trend that is likely to continue. The short term outlook for market activity hinges as much around the outlook for UK interest rates as it does the outlook for financial markets.”

The group said people’s unwillingness to either buy or sell property meant there was likely to be a continued lack of homes coming on to the market, which would support prices in the short-term.

But it said the turmoil in world equity markets during the past week will have done little to encourage market activity. Despite the rate cut last December the latest comments by the Governor of the Bank of England Mervyn King may place a question mark in people’s minds as to the timing of any future cut in interest rates.

With no immediate improvement expected on the demand side, there is likely to be a continued downward pressure on prices which were down across all regions over January - London and the South West recording the largest falls (both -0.4%).

“With most buyers also being sellers, households are now waiting until there are signs of general stability before committing to the market. Wait and see is likely to remain the default position of most homeowners unless they need to move, for the brave hearted there could be some deals to be done if the seller needs to sell or is realistic on the achievable price,” says Donnell.

Britons spend more than twice as much of their weekly budget on housing as they did 50 years ago but only half as much on food, official statistics show.

Mortgage interest payments or rent accounted for 19% of spending in 2006, up from 9% in 1957, according to the Office for National Statistics (ONS) based on a survey of nearly 7,000 households in 2006.

Using a slightly broader measure of housing costs, which includes mortgage interest payments, rent, various charges and maintenance, UK households spent an average of £143 a week on housing-related costs in 2006, out of an average weekly expenditure of £456.

Meanwhile spending on food and non-alcoholic drink fell from a third of the average weekly budget to 15%.

Greater disposable income means leisure goods and services now account for 19% of weekly spending compared to 9% in 1957.

“Expenditure on leisure remained fairly stable until 1977. From 1977 until 2006 the expenditure has increased at a greater rate than in the 20 years between 1957 and 1977,” the ONS Family Spending 2007 report says.

Other highlights from the 50th anniversary edition of Family Spending show that since 1957 the proportion of the average weekly household budget spent on fuel and power has halved, from 6% to 3%.

Spending on clothing and footwear has also halved (from 10% to 5%). Expenditure on tobacco has fallen from 6%, to just 1% while spending on alcoholic drink is unchanged at 3%. Motoring and travel costs have risen from 8% to 16%.

The survey - now known as the Expenditure and Food Survey - gathers information on household income and spending on goods and services, ranging from food and housing to transport and leisure. It is a key source of data for the Retail Price Index and is also widely used by business and academia.

Property asking prices fell again in January, according to the latest survey from Rightmove, making it the third consecutive monthly decline.

Asking prices were down 0.8% in the five weeks to 12 January but the fall was less than the 3.2% slide seen between November and December.

Annual house price inflation stood at 3.4% in January, its lowest rate since December 2005.

Rightmove said the average asking price for a home now stands at £230,428.

Despite the recent falls, Rightmove says there are signs of price stabilisation, given much of the fall can be explained by the rush of smaller properties to the market in mid December ahead of the HIPs deadline and a customary seasonal slowdown in the market.

Hips were launched on August 1 to include properties with 4-bedrooms or more and rolled-out to include 3-bedroom properties on September 10. They were then extended to included all properties on December 14.

“New listings are very low at this time of year, so the artificial wave of ‘low-end sellers’ has really distorted the average prices of new properties coming onto the market,” said Miles Shipside, commercial director of RightMove.

The company added that there had been a “marked increase” in activity and prices immediately after the new year as a result of lower prices and falling interest rates.

Mr Shipside said: “Some homebuyers are now able to find properties that have fallen into their affordability zone, and are bagging what they see as bargains against previous prices.

“Some properties have had their prices dropped by 10 per cent or more and are now within reach, satisfying some of the pent-up demand from previous disenfranchised buyers.”

Meanwhile, time on the market peaked at a record high of 98 days in December, but has declined to 95 days in the first weeks of January. The previous high was 93 days in January 2006.

Property prices are falling to an extent not seen since the 1990s housing recession, according to a report by Royal Institution of Chartered Surveyors (RICS).

During December some 49.1% more chartered surveyors reported a fall in average house prices than the proportion reporting a rise – the gloomiest figure since November 1992.

At the same time, demand remained weak with 25% more surveyors reporting a fall in the number of people looking to buy a new house compared with those who saw an increase, while sales fell for the seventh month in a row.

The survey also showed that surveyor confidence about the outlook for sales and prices had deteriorated, with both measures at their lowest level since the questions were first included in the survey in 1998.

“The housing market is clearly feeling the pinch from the credit crunch and the round of interest rate hikes in 2007,” said RICS spokesman Ian Perry.

However he noted that while sentiment has fallen sharply, the underlying economic conditions were “vastly different” to those of the early 1990s when interest rates were in double-digits.

“Supply would have to loosen considerably before prices experience a significant dip,” he added.

The survey showed that new instructions to sell property actually rose for the first time in six months, suggesting some homeowners are keen to sell before the market worsens.

But at the same time the stock of unsold property held by surveyors increased by 7.1% following a 9.1% jump in November and a 10.3% gain in October.

RICs said the next few months would be crucial to the health of the market as potential buyers wait to see if the Bank of England will reduce rates again.

The UK property market is still cooling, according to the latest government figures (November).

Data from the Department of Communities and Local Government (DCLG) showed house prices fell by 0.8% in November, compared with a slight rise of 0.1% in October.

The annual rate of house price inflation was 9.5%, down from 11.3% the previous month.

The average figure for the three months to November, seen as a more reliable indicator, fell to 10.5% from 11.1%.

The DCLG calculated that the average price of a home in the UK was now £218,330, down from £220,195 in October.

The fall in prices between October and November can be attributed to decreases in average prices for detached houses (2.4%), bungalows (0.9%), flats (0.6%) and semi-detached houses (0.3%) only being partly offset by a small rise in the price of terraced houses (less than 0.1%).

Scotland saw an increase in house price inflation from 13.9% to 14.0%. England, Wales and Northern Ireland, though, saw decreases. In England it fell from 10.7% to 9.1%, in Wales from 9.7% to 5.9% and in Northern Ireland from 32.5% to 17.6%.

House price inflation fell in six of the English regions and rose in three - the highest inflation rate being in London (14.1%) followed by the South East (10.7%), and the East (9.4%).

Inflation rates were lower in the North East (7.6%), South West (7.2%) and the East Midlands (6.6%).

The lowest inflation rates were in the North West (5.8%), Yorkshire and the Humber (5.7%) and the West Midlands (4.3%).

The department’s figures are not seasonally adjusted, so reflect the traditional slowdown in the market in the run-up to Christmas, although most other house price indexes for November also showed a slowing market as a result of tighter credit conditions and affordability constraints.

UK house prices unexpectedly rose by 1.3% in December according to the latest house price index released by Halifax.

However, the news follows three consecutive falls during late 2007, with prices in the fourth quarter as much as 0.8% lower than the previous quarter as a result.

Annual growth slowed to 5.2% in December, down from 6.2% in November and the 11.4% recorded in August – making 2007 only the second year since 2001 when prices have risen by less than the long-term average of 8%.

According to Halifax prices increased £11,759 over the year to £197,039.

“House prices increased by 1.3% in December, reversing some of the declines recorded in the preceding three months,” said Martin Ellis, chief economist at Halifax.

“This mixed pattern of monthly price rises and falls is a typical characteristic of a subdued market.”

The longer-term slowdown can be attributed to increases in interest rates during 2006/07.

“Higher mortgage repayments in response to the series of five interest rate increases between August 2006 and July 2007 and falling real earnings have put pressure on households’ income, resulting in a slowdown in both house price growth and activity in recent months,” explained Mr Ellis.

But he added that sound economic fundamentals reinforced by high employment, a shortage of supply and falling interest rates would support house prices during 2008.

The Halifax is predicting that house prices will be flat during 2008, but added that this should be seen in the context of rises of 182% during the past 10 years.

The cost of mortgages across the UK has soared to a seven-year high with mortgage bills more than 20% higher than two years ago as the credit crunch takes its toll.

Figures from the Bank of England show that homeowners are paying an average of £135 more per month for their home loan than a year ago, prompting fears of a rise in home repossessions as people struggle to pay debts.

Prime Minister Gordon Brown said yesterday that 2008 would be a “decisive year for the economy”.

The Bank of England is under pressure to announce a further cut in interest rates for a second month running this week in a bid to reduce the cost of borrowing.

But mortgage lenders have indicated that future base rate reductions will not necessarily be automatically passed on to borrowers.

Official data shows average mortgage rates climbed from 5.94% to 6.02% between September and November last year despite the Bank’s base rate remaining the same.

David Owen, an economist at Dresdner Kleinwort, said: “This is yet more proof that the effects of the credit crunch are starting to filter through to households.

“It is particularly striking that the average mortgage rate rose to this level without a similar increase in the base rate.

“It is also fair to assume there will have been an increased number of households unable to secure credit because banks have become much more unwilling to lend.”