House Prices Drop For The First Time

30 November -0001

0Comments | Comment on this Article

UK house prices have fallen by 0.6% in August as against July prices report the Halifax, the UK's biggest mortgage lender.

This is the first time the market has experienced a fall since the same month two years ago although prices still remain over 20% higher than this time last year.

The bank reported it was clear the five interest rate rises since last November had put the brake on the housing market.

This confirms a similar report from the Nationwide showing that house prices are rising at their slowest rate for three years.

With house prices increasing by 1.8% for the previous three months when compared with the 3 months prior to that rises are significantly less although some of the drop is due to normal summer drop in house prices.

The market remains underpinned by a strong economy and the average property is valued at £165,000.

There is a view in economic circles that UK house prices have climbed too high and a correction is inevitable.

The significant factor that will eventually determine house prices is the number of new buyers entering the market, these have all but disappeared. With the market loosing first time buyers then it is inevitable that prices will soon have to fall in line with income.

Even though there will be a leveling out of house prices few of the economic institutions are forecasting a meltdown as was evident during the late 80’s.

But one group of economists prediction a 20% fall in UK prices, beginning in the second half of 2004.

Lending figures released by the Bank of England on Tuesday support the view that the UK housing market is slowing.

Consumer debt rose by £10.4bn in July, but this was nearly a billion down on June's figure.

The main slowdown occurred in loans secured against homes, such as mortgages and re-mortgages.

In addition, the Bank's figures showed that the number of loans approved for house purchases fell to 97,000 during July.

The Bank's interest rate-setting committee meets next week to decide whether to lift rates again, although most analysts are expecting no change.

Consumer spending has also showed signs of moderating in July and August, so the clever money is on the Bank of England will leave interest rates static for the rest of 2004.source:Halifax,bbc

0Comments | Be the first to comment!