According to figures just released by Nationwide, house prices have fallen for a fifth consecutive month and have faltered to their slowest growth rate in twelve years. Fionnuala Earley, Nationwide’s Chief Economist said: “The price of a typical house fell by 0.6% during the month, bringing the annual rate of house price growth down to 1.1% - its lowest rate since March 1996.” She went on to state that house prices are now 1.5% lower than three months ago, at an average price of £179,110, which is only £2,027 more than this time last year. The Nationwide’s figures also show that, although it hasn’t been great news for homeowners recently, prices are still 11% higher than two years ago and 47% higher than five years ago. That equates to a rise of £30 per day, every day, for the last five years.
Although Nationwide cite the usual culprits for the latest fall, such as turmoil in the financial markets, it states that deteriorating affordability, higher interest rates and slow earnings growth were not enough to create this downturn on their own. Lack of consumer confidence is cited as a major factor in their latest press release: “When consumers think prices will rise there is a greater incentive to enter the market, thus supporting demand. On the other hand, if prices are expected to remain static or fall, the urgency disappears and demand will fade.” The building society forecast a moderate fall in prices for the remainder of the year; moderate enough for house prices to still be higher than two years ago by the end of it.
The other big player on the house price index front, Halifax, has not yet released its figures for March. In the February press release it showed a 0.3% drop in house prices, with an average price of £196,649. Unlike Nationwide they predict property prices to be flat during 2008 stating that “sound economic fundamentals are supporting house prices.” The fundamentals to back up the argument were given as the number of people in employment (a record 29.4 million) and lower interest rates.