There have been mixed signals from different parties lately regarding Britain’s house prices – some say they are still strong and have levelled off or risen in October, while others have reported a dip in prices.
Research from Nationwide has found that house prices are weathering the current credit storm and remain stable, despite a drop in demand for property. October’s figures reveal a “surprisingly strong” increase of 1.1 per cent – putting it with June for the highest month-on-month growth rate of 2007 thus far.
According to Nationwide’s data, the average UK house price for October is £186,044, £16,421 more than in October 2006.
However, Nationwide’s chief economist Fionnuala Earley, warns that seeing this as a sign that prices are immune to the credit crunch would be “misguided”, and is remindful that “most leading indicators of housing market activity are continuing to weaken.”
“Surveyor’s are reporting the weakest levels of new buyer inquiries in many years and mortgage approvals are falling from recent highs amid weaker demand and tightening lender criteria for riskier borrowers.” she said.
Ms Earley continued to say that just because UK house prices have risen beyond certain key fundamentals, such as earnings, does not automatically mean a crash of 1990s proportions is in the pipeline without a shock to other variables such as unemployment or interest rates.
On the other side of the coin, Assetz House Price Watch yesterday recorded the first fall in house prices for two years – the average price fell £1,203 from £213,954 to £212,751, according to their research.
Capital Economics have conducted a survey which predicts a further drop in house price of up to six per cent next year for some areas, and an average drop of three per cent across the country, hitting the thousands of first time buyers with 100 per cent mortgages the hardest. This can be accounted for, in part, by the five interest rate increases which mean people coming off fixed rate deals are finding they suddenly have to pay hundreds of pounds a month extra in mortgage repayments.
Meanwhile, the American property market continues to take the initial brunt of the credit crisis, as it experiences the biggest slump in house prices for six years and the lowest levels of consumer confidence since the Hurricane Katrina aftermath.
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