This ends a year of mixed fortunes for national house prices, where falls in the second half have counterbalanced gains in the first half. The average property price now stands at £163,500, down from a peak of £167,700 in June this year, bringing the 2004 annual house price inflation to just 1.30%.
The gap between supply and demand is continuing to increase, with the change in number of buyers registered with estate agents (demand) falling by -6.5% (-6.1% in November’s survey) and the number of unsold properties listed (supply) increasing by 0.1% (3.3% in November’s survey). Hometrack’s National Demand Index has now recorded an increase in supply relative to demand for seven months in a row (see Graph 2 in Notes to Editors).
Agreed sales fell by –3.8% this month (-4.8% in November’s survey), confirming that activity is still slowing down. Houses are now taking 7.5 weeks to sell (7.1 in November’s survey), although the average number of viewings has slightly decreased to 12.2 weeks (12.5 in November’s survey).
Average sales price as a percentage of asking price has decreased again this month, to 92.9% (93.1% in November’s survey). This confirms that buyers are now negotiating attractive discounts of over 7% of the asking price.
All counties reported price falls again this month, bar the Isle of Wight which reported an increase of 0.1%. The counties reporting the largest falls were Warwickshire (-1.3%), Bedfordshire (-1.3%), Northumberland (-1.2%), Herefordshire & Worcester (-1.2%) and West Sussex (-1.1%). The counties at the top end of the scale were the Isle of Wight (0.1%), Cheshire (-0.1%), South Lincolnshire (-0.1%), Nottinghamshire (-0.2%) and South Yorkshire (-0.2%).
The cities reporting the worst falls are Shrewsbury (-2.2%), Sunderland (-2.0%), Portsmouth (-1.9%), Lincoln (-1.9%), Lancaster (-1.9%). The best performing city this month was Welwyn Garden City (0.4%), followed by Bradford, Canterbury, Croydon, and Durham who all remained static with 0% house price inflation.
John Wriglesworth, Hometrack’s Housing Economist, comments: “2004 has been a roller coaster year for house prices. The first six months saw continued price rises before the market turned in July. Since then, Hometrack has reported an increasing monthly fall, cumulating in a drop of –2.5% since July.
"I expect prices to continue to fall in the first few months of 2005 by up to 3%. But again it will be a year of two halves; as the market stabilises we should see a stronger performance in the last six months, meaning that house prices should finish the year in the same state they started it (0% December 2004 to December 2005).
"My confidence in a restoration of house prices is based on four key facts: household incomes are increasing by 5% per annum, unemployment is continuing to fall and lenders are increasing the multiples of income on which they will lend. Furthermore, interest rates are still historically low. There is no reason why any of these factors should dramatically change over the coming twelve months.”
According to the Inland Revenue, there will be around 1.75 million property transactions in 2004. With the lull in activity in the latter part of 2004 feeding through to the start of 2005, this should fall to 1.6 million next year. We should, however, see normal activity resume in late 2005 and this should be sustained through 2006, when we are forecasting house price rises of 5% and 1.7 million transactions.”
