The first UK residential prices fell in February
UK residential property prices fell in February, the first price decrease for nine months but it is too early to say if it is the start of a downward trend, according to analysts.
Snow and the end of the stamp duty holiday could be responsible for the 1% monthly fall in prices in the Nationwide’s latest property price index.
‘There is evidence from a range of indicators that the market may have lost momentum in early 2010 as the stamp duty holiday ended and house hunters were obstructed by the icy weather. New buyer enquiries dropped sharply in the New Year and there was also an associated drop in the number of new mortgages taken out by homebuyers in January,’ explained Martin Gahbauer, Nationwide’s Chief Economist.
‘This drop in demand seems to have fed into agreed prices during February. Judging from the fall in retail sales during January, however, the housing market does not appear to be the only sector of the economy to have experienced a setback related to adverse weather and the expiry of economic stimulus measures,’ he said.
‘At this stage, it is difficult to gauge how much of the drop in housing activity is attributable to one-off factors and therefore whether February’s fall in prices is just a temporary blip or the start of a new trend. Even without the impact of stamp duty changes and the snowy weather, it would have been surprising to see house prices maintain the very strong upward momentum seen for most of 2009,’ he added.
He pointed out that a pause in the upward trend in property prices will, however, be a relief to potential first time buyers who are no longer benefiting from the stamp duty holiday and for whom affordability had begun to deteriorate again over the course of 2009.
The latest figures from the UK Land Registry show that in January average property prices were up 2.1% on December giving an annual price increase of 5.2% with London seeing the steepest increase of 10.5% but the North East seeing prices fall by 3.4%.
According to Royal Institution of Chartered Surveyors chief economist Simon Rubinsohn there is no point in putting too much emphasis on individual monthly figures so the Nationwide index is not necessarily the start of a trend.
‘The Land Registry confirms that house prices did rise sharply in January. This firm picture had been signalled in previous releases by both mortgage lenders and the RICS Housing Market Survey.
However, the Nationwide Building Society numbers for February cast some doubt on whether this trend can be sustained. While bad weather may have played a role in knocking both activity and prices this month, RICS believes that there shouldn’t be too much emphasis placed on monthly volatility in the numbers,’ he explained.
‘The underlying trend in the Nationwide data is still pointing toward an annualised increase in prices of more than 6%. That this is down from nearer 15% last autumn is something to be welcomed given the difficulty many first time buyers are already having in getting a foot on the property ladder,’ he added.
He said that RICS expects prices in general to continue to edge upwards over the coming months although the picture is likely to stabilise in the latter part of the year as mortgage costs begin to increase.