Latest house price data suggests that property prices are continuing to fall. Halifax recently released their house price index for the month of November; in it they stated that house prices had fallen 2.6% in the month and that the average house price in the country now stood at £163,605. Lower prices and a decrease in demand was blamed on “high house prices in relation to earnings, constraints on householders’ incomes and spending power and the decline in the availability of mortgage finance”, according to Halifax Chief Economist Martin Ellis.
The Nationwide cited a much more moderate fall of only 0.4% in November but they put the average house price lower than Halifax at £158,442. The bank’s data also shows that the average value is down £25,000 on November 2007 but up £25,000 on November 2003. Despite their figures indicating that the market may be stabilizing (house prices fell by 1.3% in October), the remainder of the month’s house price report was rather gloomy. According to Fionnuala Earley, Nationwide’s Chief Economist, the current conditions are here to last; “With the economy in recession, conditions do not appear very favourable for a swift recovery in the housing market. The labour market is weakening, which will inevitably hinder market demand” she stated.
The Land Registry’s house price index is not published as often as the others but its figures for October show a monthly fall of 1.5% and an average house price of £165,529 – the largest of the three. The Land Registry’s figures are widely accepted as being the most accurate because, not only are they independent, but they are based on completed and repeat sales. The index includes average house prices for different types of house – for example the average price of a semi-detached house is given at £154,748 as opposed to a terraced house which is given at £129,694. The index is also broken down into national, regional, county and London Borough levels. The latest house price index can be viewed at www1.landregistry.gov.uk/houseprices.
Although the Land Registry’s figures show the highest figure for the average house price and the least negative figure for annual change at -10.1% (compared to -14.9% at Halifax and -13.9% at Nationwide), the Halifax’s house price index report is the most upbeat. It talks of how the housing market is showing signs of stability, albeit at a low level. The bank comes to this conclusion by citing the fact that the number of mortgages approved to finance house purchase has remained “broadly unchanged” for the fourth successive month at a “seasonally adjusted 32,000”.
Martin Ellis’ Halifax report goes on to talk about how a key affordability measure – the house price to earnings ratio, is at its most favourable level for over 5 years. House price to earnings ratio has fallen by 22% from 5.84 in July 2007 to an estimated 4.56 in November 2008, say the bank. There are fewer positives to pick from Fionnuala Earley’s Nationwide report; she points towards the recent interest rate cuts, saying that they could help to combat the current difficult market conditions. Fiscal measures such as extra government spending, reductions in VAT, tax and national insurance contributions for the less well-off announced by the government in the Pre-Budget Statement are also sited as factors that could help the market recover.
Darling is also bringing forward an extra £775m for the coming year, to invest in social housing and regeneration projects but he has been criticised for doing little to help first time buyers who are being restricted by high deposit requirements and high moving costs. The year-long stamp duty exemption for properties of £175,000 and below will still be ending in September 2009, despite calls for it to be extended and upped to £250,000. The Chancellor has acted on the advice of the Royal Institute of Chartered Surveyors (RICS) by introducing a tax-free savings scheme in which first-time buyers can build up a deposit. However, this amounts to little more than an ISA with a different name and young earners are about to be hit by an increase in National Insurance contributions.