Weak buyer demand sees slump in house prices

Category: Mortgages
Date: 7/29/2010

The value of a home in the UK fell by an average of 0.5% in July as a result of continuing weak buyer demand.

There was also a sizable drop in the annual rate of house price inflation from 8.7% in June to 6.6%, according to figures from Nationwide.

Furthermore, the three month on three month rate of change – considered to be a smoother indicator of price trends – fell from 1.7% to 1.3% in the month, significantly below the peak of 4% seen in September last year.

The average price of a property ends July at £169,347, down from £170,111 in June.

"So far in 2010, demand from homebuyers has seen little progress in building upon the recovery seen during much of 2009," commented Martin Gahbauer, chief economist at Nationwide.

"Despite the introduction of a second stamp duty holiday for the vast majority of first time buyers and record low interest rates, the number of properties changing hands across the UK is still running at only half the levels seen prior to the financial crisis and recession."

The gains in prices in the housing market that were seen in the second half of 2009 and early 2010 were driven by low levels of housing stocks.

This has eased, however, as the abolition of home information packs has lessened the cost of putting a home on the market, encouraging speculative sellers to test the mortgage market.

It also appears that some homeowners that became accidental landlords when prices originally fell are re-attempting to sell their homes.

"At the moment, the market is clearly easing relative to the very tight supply conditions that characterised it since early 2009," added Mr Gahbauer.

"However, it will take several more months to establish whether house prices are now simply oscillating a flat price trend or whether a period of downward trending prices may be in store."

If falling prices are enough to tempt you to dip your toe in the mortgage market, the Moneyfacts.co.uk Best Buy tables could well be the place to find the deal to suit your needs.