Buyers could face double squeeze as house prices fall again
8th December 2010
Home buyers could face a double squeeze of lessening supply and being unable to get a mortgage in coming months, as Nationwide said house prices fell for a fourth month out of five.
Mortgage lender Nationwide'sNovember house price survey said the average price of a property fell 0.3pc during the month to £163,398, a slightly bigger drop than the 0.2pc fall forecast by analysts. The annual rate of growth fell to 0.4pc, its weakest since September 2009.
Much of the recent weakness in property values has been driven by a return of sellers to the market.
But Nationwide chief economist Martin Gahbauer said supply pressures were starting to ease and there was little to suggest house price declines would accelerate in the months ahead.
"There are early signs that the flow of new property onto the market may be slowing down again as potential sellers observe the recent weakness in prices and decide against marketing their properties at the current juncture," he said.
Mr Gahbauer said this could lead to a repeat of late 2008 and early 2009, when similar behaviour led to a decline in the amount of property on the market.
Weakness was also attributed to more buyers being unable to obtain a mortgage, with house purchase activity significantly lower than the housing slump of the 1990s, largely due to the global financial crisis.
“Whereas in the 1990s the number of mortgages taken out for house purchase initially saw a large decline from unsustainable highs, it then settled close to the long-run average. In the current downturn, house purchase approvals have fallen to an all-time record low and are still close to 50% below the long-run average,” said Mr Gahbauer.
“A general conclusion that can be drawn is that although house prices have so far fallen by less than they did in the early 1990s, house purchase activity has fallen by more.”
Nationwide's figures tally with a raft of data showing last year's property market rebound has gone into reverse as Britons prepare for the toughest government spending squeeze in generations.
Banks, wary of an escalation in the euro zone's debt crisis, have also reined in lending to all but the safest of borrowers.
Still, there was little evidence that price falls were gathering momentum in the way they did during the downturn of 2008. The three-month on three-month rate of decline actually moderated to -1.3pc from -1.5pc in October, the first improvement in this measure since June.
Source: Telegraph 8/12/10