UK house prices wilting in summer

Sold signs House prices are falling in part because of more properties for sale

UK house prices have fallen slightly in the early summer compared with the start of the year, a survey has found.

Property values dropped by 0.6% in June compared with May, following a 0.5% fall the previous month, the Halifax said.

This meant prices in the second three months of the year were 0.1% lower than the first quarter.

More properties coming on to the market and less activity from house buyers caused the fall, the lender said.

The average home in the UK is now valued at £166,203 according to Halifax figures.

The typical property was still 6.3% higher than a year ago, although the figures point to the house price recovery faltering this year.

Annual UK house prices graph
'Balance'

Martin Ellis, housing economist for the Halifax, said that the figures were not a great surprise.

Start Quote

House prices are likely to be erratic over the coming months and will probably be only flat over the rest of 2010”

End Quote Howard Archer IHS Global Insight

"This pattern is in line with our view that house prices will be broadly unchanged over 2010 as a whole," he said.

"A shortage of properties for sale in 2009 contributed to an imbalance between supply and demand and was a key factor driving up house prices last year.

"An increase in the number of properties available for sale in recent months has helped to reduce the imbalance, relieving the upward pressure on prices."

He said that the continued low level of interest rates continued to keep demand steady. The Bank of England's Monetary Policy Committee announced on Thursday that it is to keep the Bank rate at 0.5%.

Contrast

Some of the figures are in contrast to the views of the Nationwide Building Society which has reported month-on-month house price rises in May and June, of 0.5% and 0.1% respectively.

Houses The abolition of Hips has encouraged some people to sell

The Nationwide also records prices rising faster year-on-year, although it too suggests this has started to slow down.

The Halifax calculates the annual rate of change by comparing the average house price over the past three months with the average for the same three-month period the year before.

The Nationwide conducts a more straightforward monthly year-on-year comparison, although this could be affected by short-term blips.

A number of house price surveys have suggested that property values will remain relatively static in 2010.

"We believe that house prices are likely to be erratic over the coming months and will probably be only flat over the rest of 2010," said Howard Archer, economist at IHS Global Insight.

"Furthermore, it is hard at this stage to be optimistic about house prices in 2011 as the fiscal squeeze will increasingly kick in, which will hit people's pockets and lead to serious job losses in the public sector."

End of Hips

Homeowners have been more encouraged to sell property in 2010 following the price rises of last year, the Halifax said. The abolition of Home Information Packs by the new coalition government has further encouraged them.

As a result, this has pushed prices down. The average home remains worth 7.5% more than at the trough of the market in April 2009, but 17% below the August 2007 peak.

Meanwhile, housing demand from buyers has eased, with the Bank of England reporting a dip in the number of mortgages approved for house purchases.

Separate research from the Halifax suggested the costs associated with owning and running a home in the UK had fallen by 6%, or £544, in the last two years.

Housing costs in the UK were now equivalent to 27% of gross average full-time earnings, down from 30% in 2008, the lender said. This was driven by falling mortgage costs at a time of low interest rates.

David Smith, of property consultants Carter Jonas, said that low mortgage rates were encouraging some buyers to move now - notably for properties valued at £750,000 and above in the South East of England.

He said that sellers across the value and geographical range were coming back to the market.

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