House Prices Down Again

Average house prices across the UK have fallen for the fifth month in a row, according to figures from property information firm Hometrack. The average price is now £174,400 – almost £2,000 lower than in the autumn.

These figures back up recent forecasts that 2008 will see a major downturn in the housing market – if not an out and out crash. A worrying trend has been the low numbers of new buyers registering with estate agents in a period when figures usually pick up.

In the last few years there has been a 25% pick up in registrations in February, compared with January, but Hometrack says this year the increase has only been 7.9%. Thus, demand is unlikely to arrest the price drop.

House prices are beginning to fall in real value as annual house price inflation slips behind economic inflation. In six London boroughs prices have gone up by less than inflation over the past 12 months. Over London as a whole annual house price inflation has been 4.2% for the last 12 months, compared with 13% this time last year.

The best performing borough was Merton, where prices rose 7.7% to £351,600. Camden did well with 6.5% and Hammersmith and Fulham went up by 6.1%. Kensington and Chelsea had the highest prices in London with an average home costing £726,400. The cheapest homes are in Barking and Dagenham, at £158,600.

Cass Business School fellow Peter Hahn said: “Mortgages have been too cheap for too long and now we are seeing the opposite. Loans are harder to come by and more expensive. That means lower house prices. My advice for people is this: don’t buy property now. Wait until prices come down this year.”

Meanwhile mortgage lending bounced back slightly in January from December’s poor showing, according to figures from the British Bankers’ Association. Although house purchases mortgage approvals rose to 44,288 in January from a record low of 42,343 in December, the number was still one of the lowest on record and down 31.3% year-on-year.