House prices fall by 0.5%, says Nationwide

Annual rate of house price inflation has dropped to 6.6% compared to 8.7% in June, a Nationwide report shows, and the outlook remains bleak

House prices fell in July for the first time since February, reducing the average price of a UK property to £169,347 from £170,111 last month, according to latest figures from the Nationwide building society.

The 0.5% monthly fall now means the annual rate of house price inflation dropped to 6.6% in July compared to 8.7% in June. Demand from homebuyers remains subdued, Nationwide said.

"So far in 2010 demand from homebuyers has made little progress in building upon the recovery seen during much of 2009," said Martin Gahbauer, Nationwide's chief economist.

"Despite the introduction of a second stamp duty holiday for the vast majority of first-time buyers and record low interest rates, the number of properties changing hands across the UK is still running at only half the levels seen prior to the financial crisis and recession."

Gahbauer said a combination of restrictive credit conditions and uncertainty about the future economic outlook means only wealthier buyers remain in the market. "Many potential buyers still lack the confidence to purchase their first home or trade up when faced with uncertainty over future income and employment prospects," he said.

The outlook remained bleak, according to Nationwide, with concerns about the medium-term impact of fiscal austerity on personal finances "more than outweighing any potential optimism about the recovery's short-term cyclical momentum".

Howard Archer, from IHS Global Insight, said the figures supported his view that prices are likely to fall by 3%-5% in the second half of the year and lose further ground in 2011.

"The 0.5% house price drop in July adds to a now steady stream of weak data and survey evidence on the housing market, and further fuels our belief that house prices will fall back over the latter months of 2010 and very likely soften further in 2011."

Earlier this week a Hometrack survey showed house prices falling by 0.1% in July – the first decline in 15 months according to its data. The report also indicated that talk of impending public spending cuts is hurting confidence, with a 1.3% fall in new buyers registering with agents and homes now taking 8.7 weeks to sell – back to August 2009 levels.

Mark King, The Guardian 29-07-2010

Consort Estate