Friday, December 31, 2004

House price fall signals end of boom (UK)

House price fall signals end of boom

Times, UK
BRITAIN’S four-year housing boom is over, according to the country’s biggest building society, which confirmed yesterday that efforts to take the heat out of the housing market were working.

In December, house prices fell for the second time in three months, bringing the annual rate of increase down to 12.7 per cent, its lowest level for three years, said Nationwide Building Society.

However, Nationwide is sticking to its prediction of a soft landing for British house prices next year, saying that the market was on track for an orderly slowdown.

Alex Bannister, group economist at Nationwide, said: “The evidence is consistent with house prices treading water in most regions.

“A sharp downturn in prices cannot be completely ruled out, but whilst the economic outlook remains positive it looks unlikely.”

Nationwide is predicting that house prices will nudge up just 2 per cent next year, compared with the annual average increase of £17,000 this year, or £47 a day.

“Broadly favourable economic conditions combined with the ongoing imbalance between the demand for housing and the rate of new build mean that a significant decline in prices will be avoided,” said Mr Bannister.

He went on to conclude that while nothing could be guaranteed, there were signs that the housing market may be beginning to stabilise.

The lender said that the average house price fell 0.2 per cent this month to £152,623 following a 0.9 per cent gain in November.

Nationwide’s survey suggests many homebuyers are feeling the impact after five interest rate rises since November last year. The figures could fuel speculation that rates will start to fall again next year.

A shortage of first-time buyers has also contributed to the fall in average prices. Only 349,000 properties were bought by first-time buyers this year, the lowest figure since the mortgage market was deregulated in the mid 1980s.

Nationwide said that house prices had trebled since 1995 but average pay had gone up by only 50 per cent in the same period, making it increasingly difficult for first-time buyers to enter the market.

“Those that have managed to enter the market have been forced to purchase further down the housing ladder than was the case in 1995,” said Mr Bannister.


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