Property price falls in December will take house price growth below the 5% mark for the year. Figures from the UK’s largest building society, Nationwide, show that prices were down 0.5% from November, giving back-to-back monthly falls.
Perhaps a truer indication of house price movement is the figure over three months, and that is a growth of 0.9%, compared to a figure of 1.4% in November. The three months to December is the lowest figure for two years.
Now the annual house price inflation figure is 4.8%, the lowest annual figure for 19 months. It was 6.9% only a month earlier, and was as high as 11.1% just six months ago, in June.
The figures from Nationwide suggest that the average UK house price is now £182,080 - a rise of £8,334 on the year.
Property group Hometrack also noted that house prices suffered their biggest monthly decline for nearly three years, with average house prices falling 0.3% in December compared to November, the largest monthly fall since January 2005.
The 5% threshold has some significance as it means that many cash funds are now giving better returns than property investments. In addition, they are much less risky.
Chief economist at Nationwide, Fionnuala Earley, said: “Most indicators now show that demand is responding to the pressures of weak affordability, past increases in interest rates and the lower house price expectations that we had expected to take hold earlier in the year.”
Howard Archer is an economist at Global Insight. He said the Bank of England would stay under pressure to make an interest rate cut in the New Year. He said: “It is clear that the housing market ended 2007 under mounting pressure from increased affordability pressures and tightening lending practices, and it looks set for further deterioration in 2008. The rising risk that the housing market could be headed for a sharp correction maintains pressure on the Bank of England to trim interest rates again early in 2008.
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