• The average price recorded in all completed property transactions in England and Wales fell by 1.2% in October. This is the eighth consecutive monthly price fall and the fourth month in a row when the fall has exceeded 1%.
• Average prices of completed transactions in England and Wales (including London) are now 6.2% lower than a year ago. All ten regions in England and Wales now show prices falling on both a monthly and an annual basis.
• In London prices are trending down rapidly. The annual growth rate in the capital (averaged over the past three months) is now at -2.5%, double the previous month’s average rate, and the previously large disparity with other regions is narrowing fast.
• The market is still in a continuing decline. All UK house price indices are currently negative, but the index measures that are based upon the final prices achieved in a sales transaction (FTHPI, Land Registry - recently rebased - and CLG) are showing a materially less negative picture of the market than that provided by the indices based upon mortgage offer prices (Halifax, Nationwide).
• Although many negatives remain, the action by both government and the Bank is helping to ease some pressures and if this is sustained it is possible the market will stabilise in 2009.
Dr Peter Williams, Chairman of Acadametrics, comments, “On a monthly basis, the average price of a home in England and Wales fell by 1.2% in October, making this the eighth consecutive month of nominal price falls recorded by the FT index and the fourth month in which falls have exceeded 1%.
“The average price of a home peaked in February of this year at £231,854, since when it has fallen by around 6.8% i.e. by £15,757 to £216,097. This takes the average price back to where it was in January 2007, some 21 months ago. This is unlikely to cause problems for the vast majority of households but it will be a factor for those who cannot afford their loan repayments, and/or who have to sell and move home. With further price falls anticipated over the coming months and the reality of rising unemployment, we can expect to see growing problems created by negative equity. The BoE’s recent estimates show that allowing for a 6% house price reduction, well over half of borrowers still have loan to value ratios of less than 50% and under 5% of borrowers would be in negative equity.
“The annual rate of change of -6.2% is our lowest reported figure since January 1993, and this is the fourteenth month in succession in which the annual rate has fallen in nominal terms.
“Over the last two years, we have regularly highlighted that the London market has been out of line with all the other parts of England and Wales. As anticipated, the differentials in rates of change have now all but disappeared as the London market has contracted at a pace. If London is excluded, the England and Wales monthly figure is identical at -1.2% while the annual rate is 0.7% lower at -6.9%.
“Prices in all regions in England and Wales are declining, month on month, and all regions are now negative on both a monthly and an annual basis. The most severe annual falls have been in East Midlands and Wales, down by 6.5% or more. The scale of the recent change in price trends is dramatic, not least in London, where the annual rate of increase has declined from over 17.5% in October 2007 to -2.6% some 12 months later in September 2008.
“Looking at price trends in local authorities on a three month averaged basis, there are still significant variations across England and Wales. But there are now twenty-seven London boroughs and ninety-five districts where prices have fallen over the past year, and there is now only one London borough and no county or district with annual price inflation still in double figures.
“The October Bank of England Financial Stability report commented that the fears of an adverse spiral developing had materialised triggered by deteriorating macro-economic prospects and weakening housing markets. However the widely anticipated further cut in interest rates should stabilise the housing market by easing pressures on many existing borrowers and not least those who will need to remortgage (including sub prime borrowers whose mortgages are priced off LIBOR). Together with some evidence of increased net lending and consumer confidence there is a possibility that the market will bottom out in 2009. However there is still a significant gap between asking and completion prices, suggesting seller reluctance to accept the new realities and transaction levels remain at historic lows. With the possibility of increased arrears and possessions in 2009 government and lenders will need to continue to manage the market through the next few months in order to avoid serious difficulties and restore a semblance of normality. Continuing to improve the safety net for home owners in difficulty and restoring an adequate flow of mortgage finance are key priorities.”
