The LSL Property Services and Acadametrics house price index showed that December’s annual property price inflation was down from 5.1% the previous month and 5.3% in 2009, as prices continued their steady monthly decline.
In addition, transaction numbers fell 5% in December to 53,000, 33% down on year-on-year. However, the latter figure has been skewed by the level of buyers looking to purchase before the stamp duty holiday finished at the end of 2009.
Figures reveal that the level of transactions in December was 43% below the long-term trend over the last 15 years of 93,800 properties sold in the month.
Dr Peter Williams, housing market specialist and chairman of Acadametrics, said that house prices will continue to be broadly flat until housing transactions return closer to the 15-year average.
House prices fell 0.2% in December bringing the average house price to £222,827. This means that house prices were 3.9% off their peak of £231,828, which was recorded in February 2008.
Richard Sexton, director of chartered surveyors e.surv, part of LSL, said: “While average house prices are falling, the steady rate of the decline indicates a degree of resilience in the market.
“While it is true that there is a shortage of buyers seeking new properties, this is largely driven by the continuing drought in mortgage finance. Although the average LTV for first time buyers rose to 80%, the total number of house purchase loans is down 4% – indicating that mortgage refusals have become more frequent.”
However, he said that sharper price falls could result in negative equity having a significant impact on buyer and lender confidence.
Sexton added: “Nevertheless, there are currently plenty of would-be buyers available to take on mortgage products where they are offered and for those with a large amount of spare cash, the current market still represents a good opportunity to invest in affordable property.”
Regional disparities in house prices are also widening, with London and the South East recording significantly stronger growth than the national average, a trend likely to continue through 2011.
The North, Wales and Yorkshire & Humberside are recording house price falls on an annual basis using average figures over the past three months.
Nevertheless, the whole of England and Wales is seeing a general trend downwards in house prices.
Williams said: “With the real possibility that we will see at best a flat market for the next year or two, a new realism has to be embraced by sellers if their circumstances allow. The Housing Minister in England attracted some attention recently by arguing for a period of house price stability in which homes would gradually become more affordable.
“As much of the subsequent commentary has pointed out, although there is much merit in such an argument, more affordability can probably only be achieved long term if we see a significant increase in housing supply.”
However, he added: “In the short term, homes are becoming more affordable, but in somewhat unusual circumstances. It is far from clear that in the absence of policy change this will be anything other than a short to medium term blip before the upward trend in prices resumes.
“As always there are strong regional and local variations, and in this monthly commentary we look in some detail at ‘hot and cold’ spots across England and Wales. These point up the need for buyers and sellers to look closely at local trends alongside the national picture.”
