Mortgage News
Nationwide: August house prices down 0.6%
Sluggish demand from home buyers and poor UK economic growth pushed house prices down 0.6% in August, which means inflation has been broadly flat for the last 12 months.
Annual price growth remains at -0.4% and Robert Gardner, Nationwide’s chief economist, said the August figure doesn’t change the picture of relative stability characterising the market over the past year.
“We expect this trend to be maintained over the remainder of 2011, although downside risks have increased as UK and global growth prospects have weakened,” he said.
Gardner said at 0.2%, UK growth is well below its long-term trend rate of around 0.7% at 18 months into the recovery. This is 4% below the figure at the end of 2007, he added.
The fact the recovery is failing to take off in either the US or Eurozone, our two biggest export markets, are a concern for the UK, he said.
Continuing UK economic stagnation could put pressure on jobs and further deterioration could result in more lay offs than 2008, where many firms attempted to cushion workers with options like part-time work.
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Gardner said: “For some time now the residential property market has been moving sideways, as weak demand for homes co-existed with a situation where relatively few homes were coming on to the market. A further fall in employment would be likely to upset the relatively delicate demand-supply balance and put downward pressure on prices.”
Nationwide said it expects the economy to revive in the coming quarters as interest rates stay on hold into 2012, which should support domestic spending.
“Against this backdrop we continue to expect house prices to move sideways, or drift modestly lower over the remainder of 2011, although we recognise that the downside risks have increased.”
Matt Hutchinson, director of Spareroom.co.uk, said the mutual is right to draw out the the link between the struggling economy and the performance of the property market.
“Buyers seemingly have little appetite to purchase unless they find sellers willing or able to drop their prices. The problem is many sellers simply aren’t in a position to drop their prices, so we enter the limbo we’re currently in.”