Martin Gahbauer, Nationwide's Chief Economist, said:
“The recent trend of modestly falling house prices continued during November, with the price of a typical UK property declining by 0.3% on a seasonally adjusted basis between October and November. The three month on three month rate of change – a smoother measure of the recent price trend – rose from -1.5% to -1.3%.
"This remains well above the deeply negative rates of -5% to -6% that prevailed during the most severe phase of the downturn in 2008. The annual rate of change – which compares house prices to their level 12 months ago – fell from 1.4% to 0.4% and suggests that house prices are essentially unchanged from a year earlier.
“There is little evidence to suggest that house price declines are likely to accelerate in the months ahead. Much of the weakness in property values since the Spring has been driven by a return of sellers to the market, following unusually low levels of property for sale in 2009 and early 2010.
"However, there is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest. In addition, there are early signs that the flow of new property onto the market may be slowing down again as potential sellers observe the recent weakness in prices and decide against marketing their properties at the current juncture.
"Similar seller behaviour was observed in late 2008 and early 2009, eventually leading to a decline in the amount of property on the market.
How does the current downturn compare to the early 1990s?
“Three years ago – in November 2007 – house prices as measured by the Nationwide Index began to fall, ending a decade long boom. At the three year anniversary of the first house price falls, it is worth considering how the current down cycle has evolved in comparison to the last major housing downturn in the early 1990s.
“A general conclusion that can be drawn is that although house prices have so far fallen by less than
they did in the early 1990s, house purchase activity has fallen by more. Over the first 18 months of the current downturn, real (i.e. inflation-adjusted) house prices tracked the path of the early 1990s very closely.
"Over the following 18 months, however, real house prices staged a small rebound, whereas in the early 1990s they continued falling broadly at the previous rate of decline. As things currently stand, real house prices are 19% below their 2007 peak, whereas at the equivalent stage of the early 1990s downturn, they were 31% below their peak.
"The most likely explanation for this is that while real interest rates remained very high throughout the 1990-1992 period, they have fallen dramatically into negative territory in the current down cycle, providing more support to mortgage holders.
"The supportive interest rate environment shows up clearly in the number of repossessions, which has been much lower in the current downturn compared with the 1990s.
“One measure on which the current downturn has been weaker, however, is house purchase activity. Whereas in the 1990s the number of mortgages taken out for house purchase initially saw a large decline from unsustainable highs, it then settled close to the long-run average.
"In the current downturn, house purchase approvals have fallen to an all-time record low
and are still close to 50% below the long-run average. This weaker profile of approvals is primarily due to the fact that the current housing downturn was accompanied by a global systemic banking crisis that limited the availability of credit.
"In the 1990s, by contrast, the banking system did not suffer a comparable crisis and the flow of credit did not become as constrained.”
Catherine Penman, head of research, Carter Jonas, commented:
“The stalling economic situation reinforced by the Comprehensive Spending Review, weak outlook for mortgage demand and public sector cutbacks collectively imply a further weakening of demand in residential property over the year to come.
“Although house prices have only fallen by less than 2% in 2010 across the UK as a whole, this disguises a wide variation in activity. A notable improvement in both pricing and sentiment was evident during the first half of the year which has since been counteracted by an increasingly cautionary tone and heavy downward pressure on prices during the second half of the year.
"This negative pressure is expected to continue with an estimated 5% decline in house prices across the UK expected in 2011 as job losses intensify. A regional divergence will become increasingly apparent moving forwards with the country house market.
"Whilst not immune to the national housing market slowdown, it is expected to be sheltered to an extent. Good quality product priced at realistic levels will continue to sell well with stock levels remaining generally low and demand resilient throughout the prime markets.
“Central London will continue to lead the pack in terms of recovery during 2011 due to its reliance upon the high earning financial and business services sector and a strong international investor profile. With an acute shortage of stock registered in most London markets, activity is likely to reduce over the forthcoming months.
"That said, the volume of buyers remains consistent. There has been a notable shift towards the purchasers’ perspective and away from the domination of the vendor which has been the main characteristic over the last two years.
“Best in class stock is currently achieving in excess of 2007 prices, although potential purchasers remain very price sensitive and there is a wi
