- The price of a typical UK house fell by 0.7% in July
- Prices 2.6% lower than one year ago
- Price of a typical home was £164,389
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said:
“UK house prices declined for the fourth time in five months in July, with prices falling by 0.7%. This pushed the annual pace of price growth down to -2.6%, from -1.5% in June - the weakest outturn since August 2009.”
“The weaker price trend observed in recent quarters is unsurprising, given the disappointing performance of the wider economy. Data released last week revealed that the UK recession intensified in the three months to July, with the economy contracting by 0.7% quarter on quarter. This disappointing outturn can be only partly explained by unusually wet weather and the impact of an extra bank holiday during the quarter. Indeed, the UK economy has contracted by 1.4% over the past nine months, and is now 4.5 percentage points smaller than it was in Q1 2008.
“Against this difficult economic backdrop, it could be argued that UK house prices have shown resilience. While prices are currently 13% below their 2007 peak, this is less than the declines seen in a number of other economies that have experienced similar or more robust economic recoveries.”
Along with the lack of building activity in recent years, a large part of the explanation probably relates to the unexpected strength of the UK labour market. The UK added almost 250,000 jobs in the last seven months for which we have data (a rise of 0.8%), even though economic output fell by more than 1% over that period.
However, this pattern of negative economic growth and steady employment growth cannot be sustained indefinitely. Much will therefore depend on the ability of the UK economy to gain momentum in the quarters ahead if labour market conditions, and therefore demand for homes, are to be adequately supported.
Ashley Alexander, MD, estate agent review website MeetMyAgent.co.uk, said:
"The summer of 2012 will be remembered for being a summer of sporting - rather than property - activity. The property market has gone direct to a repechage. The property market seems to be mirroring the economy — there is a far closer correlation between the two than there has been in the past.
"There is no reason to believe the latest round of quantitative easing will have any effect on the property market although the hope is that it will be given a boost through the Funding for Lending scheme, which starts today. All eyes are on the banks and whether this latest initiative will finally get them to lend.
"The hope is that the Funding for Lending scheme, and the end of the Olympics, will see a surge in activity in the Autumn and inject some much-needed momentum into the market. There are already signs of an improvement in mortgage rates, but we'll have to wait and see whether this will extend to higher LTVs. Even if there is a greater availability of credit, the question is whether there is the demand for this credit. Consumers remain very cautious."
