The Hometrack October survey of the national housing market reports a –0.6% fall in average national house prices. Over the last eight months house price inflation has steadily reduced from a peak of +0.9% in February (See Graph 1 in Notes to Editors) to negative price growth since the summer.
The excess supply of properties on the market has increased again this month with the number of buyers registered with estate agents falling by –3.8% and the number of properties listed increasing by 5.6%.
Hometrack’s unique National Demand Index is now recording an increase in supply relative to demand for the fifth month running. The excess supply points to further house price falls in the coming months.
Hometrack predicts that house prices will not grow in 2005.
Agreed sales fell by 1% this month (-5.4% in September’s survey). While the number of sales agreed is still decreasing it is at a slower rate than previously.
Average time taken to sell has risen again to 6.5 weeks (September’s survey reported 5.8, August’s survey reported 5.3 weeks) and the number of viewings has risen to 11.9 per sale (September’s survey reported 11.4 viewings). The average price achieved fell further to 93.7% of the asking price (94.5% in September), the lowest level recorded by Hometrack, indicating that a buyers market remains in force.
For the second month running, house price falls are spread across all the country. No counties reported house price rises.
The largest falls occurred in Avon (-1.6%), North London (-1.5%), South West London (-1.2%), South East London (-1.2%) and East London (-1.2%). While the south is definitely experiencing the highest property price falls, price falls in the north are getting larger and becoming more widespread.
House price falls practically everywhere.
A fall of –0.6% matches the largest fall that Hometrack ever reported (October 2001, reflecting the impact of September 11th). The average national property price (£165,800) has now come down from its peak of £167,700 in June 2004 by 1.2%.
John Wriglesworth, Hometrack’s Housing Economist, comments: “While rising interest rates have influenced the recent run of house price falls, the key reason for the stagnating house price environment is that house prices have finally reached their peak in the current cycle. However we see no sudden or significant prospective downturn. Much lower interest rates compared with ten years ago, strong rises in household incomes, lower unemployment and lenders now willing to offer larger mortgages relative to incomes all point to a levelling out of house prices. House prices will not plummet into an abyss as some of the doomist commentators have been predicting.
However, house prices are likely to drop further over the next few months due to the current excess supply and the expected seasonal fall off in the number of prospective buyers. Prices should however begin rising again in spring next year when, barring further interest rate rises, buyers should return to support demand. Overall, we continue to expect 0% house price inflation for 2005. Stagnation, not deflation, is the most likely future course of house prices over the next 18 months.”
