Prices in the three months to November were 2.1% lower than in the preceding three months. The rate of decline, however, is significantly lower than the quarterly rate of decline of -5% to -6% during the second half of 2008.
House price data on a quarterly basis provides a clearer indication of the overall market trends, smoothing out the volatility caused by the reduced number of monthly transactions in all house prices indices’ monthly figures.
Prices in November were 2.4% lower than at the end of 2009.
House prices are now marginally lower than a year ago. Prices in November were 0.7% lower on an annual basis as measured by the average for the latest three months against the same period a year earlier. This was the first annual decline since November 2009 and continues the recent downward trend from a high of 6.9% in May.
House prices in November were 6.5% higher than in April 2009. Despite the recent downturn, prices remain above the trough reached in spring 2009. The average price is now £164,708; £10,045 higher than in April 2009.
The low interest rate environment has reduced the burden of servicing mortgage debt. Typical mortgage payments for a new borrower have fallen from a peak of 48% of average disposable earnings in mid 2007 to 29% in 2010 Quarter 3.
This key measure of affordability is at a better level than the long-term average over the past 25 years (37%) and is an important factor supporting housing demand.
Housing market activity is softening. Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase – a leading indicator of completed house sales – continued on its gentle downward trend, falling for the sixth successive month in October.
The number of approvals in October (47,200) was 5% lower than in April (49,700). The ending of the stamp duty holiday on properties between £125,000 and £175,000 at the end of 2009 boosted the number of approvals during 2009 Quarter 4.
This will have an adverse impact on annual comparisons over the next couple of months.
Commenting, Martin Ellis, housing economist, said:
"Prices fell by only 0.1% in November, and in the three months to November were 2.1% lower than in the preceding three months. The rate of decline in prices on the three month-on-three month measure has picked up over the past few months, but it remains well below the declines of 5-6% in the second half of 2008.
"The highly mixed picture of monthly house price rises and falls recorded this year continued. Such a varied monthly pattern is consistent with a relatively flat underlying trend for house prices.
“Higher numbers of properties for sale, combined with reduced demand, have caused the recent decrease in prices. There are, however, some tentative signs that homeowners are becoming more reluctant to put their properties on the market which, if continued, will help to relieve the current downward pressure on prices.
"Interest rates are likely to remain very low for an extended period, which will support the improved mortgage affordability position for homeowners. As a result, we do not expect to see a significant fall in house prices."
Philip Clarke, managing director of property consultants, Fisher Property Services, comments:
"The 0.1% monthly fall is negligible but the three-month on three-month decline will cause some concern.
"However, although prices may drop again in December and in the early part of 2011 there is unlikely to be an acceleration in price falls given the low interest rate environment, which is unlikely to change for some time yet.
"In the months ahead, we are likely to see more of the same month-on-month volatility with no definitive trend.
"Demand for property in the still uncertain climate remains muted. Even where there is demand, and it does still exist, the problem is a lack of finance. The great mortgage famine of the past three years shows no sign of subsiding.
"But as long as rates remain at their current level, or in the same ballpark, we do not expect further significant price falls in 2011.
"How the property market reacts when rates do begin to rise depends on the timing and pace of the up-cycle. Too sharp a rise too soon, namely before households and the economy are ready for it, could see further price falls."
