Commenting, Martin Ellis, housing economist, said: "There was a 0.5% decline in average UK house prices in June. On a quarterly basis, the 1.9% fall in house prices in the second quarter was the smallest since 2008 quarter one. These figures provide evidence that the underlying pace of house price decline is easing.
There are further indications of a modest improvement in sales activity, albeit at a very low level. Industry-wide figures show that the number of mortgages approved to finance house purchase increased for the fourth successive month in May. Approvals were at their highest level since April 2008 and 10% higher than a year earlier.
Improvements in affordability and low interest rates have stimulated housing demand. This, together with a low level of properties available for sale, has helped to stabilise activity and reduce the underlying rate of house price decline in recent months.
Whilst there have been encouraging recent signs of improvement, the outlook for the UK economy remains uncertain with unemployment set to continue rising for sometime. Overall, we expect to see a continuing mixed pattern of monthly house price rises and falls over the remainder of 2009."
Simon Rubinsohn, RICS chief economist said: "Data released by HBOS this morning shows that house prices fell by 0.5% in June. This drop stands in marked contrast to the figures published by the Nationwide Building Society last week which recorded a 0.9% gain. The latter series has been painting a more upbeat picture for a number of months with the result that it is now showing a year-on-year decline in house prices of just 9.3% compared with HBOS estimate of 15%. This is the largest gap between the two series since January 2001.
"The HBOS numbers do have a tendency to be a little more volatile that the Nationwide data. Nevertheless, the continuing weakness in the former series provides a timely reminder that despite the better newsflow emerging from the housing market it is far from clear that prices have bottomed. The combination of further job losses and a continuing lack of mortgage finance remain major headwinds for the market. The major support for the market, as clearly demonstrated in the RICS monthly housing survey, is the lack of new instructions to estate agents. This has led the best lead indicator of house prices, the RICS Sales to Stock ratio, to turn upwards in recent months."
Key facts
• House prices declined by 0.5% in June. The mixed picture of monthly rises and falls so far this year contrasts sharply with the consistent succession of significant monthly declines recorded in 2008. This indicates that the underlying rate of decline in house prices has eased.
• House prices declined by 1.9% in Quarter 2. This was the smallest quarterly fall since 2008 Quarter 1 and was significantly less than the 5-6% declines in the last three quarters of 2008. The UK average price has returned to where it was five years ago in 2004 Quarter 2 (£157,091).
• House prices in June were 15.0% lower on an annual basis. The annual rate of change (measured by the average for the latest three months against the same period a year earlier) improved for the second successive month and compares with -17.7% in April. The annual rate of decline is at its lowest since November 2008.
• Tighter supply/demand balance has helped to support activity and prices. Increased demand, combined with a low level of properties available for sale, has helped to stabilise activity and reduce the underlying rate of house price decline in recent months. The ratio of house sales to the stock of unsold properties on surveyors' book rose for the fifth consecutive month in May, indicating a tightening in market conditions, according to the latest RICS monthly survey.
• Lower interest rates have boosted affordability. Monthly repayments accounted for an estimated 21.6% of average gross household income in June 2009 for existing mortgage borrowers. This compares with a peak of 26.9% in October 2008 and is the lowest proportion of income devoted to mortgage repayments since mid 2004. The decrease in the average mortgage rate paid by existing borrowers from 5.82% in October 2008 to 3.59% in May 2009 (source: Bank of England) is the main driver of this reduction. The long-term average for income accounted for by mortgage repayments is 20.4%.
• The cost of owning and running a home in the UK has fallen by nearly a fifth over the past year. Between April 2008 and April 2009, the average annual cost of housing fell from £8,766 to £7,298, a decline of 17% (£1,468). The significant fall in housing expenses over the past year was driven by the decline in mortgage interest payments. Housing costs currently account for 23% of average UK full-time earnings, down from 28% in 2008. The overall expense of owning and running a home is at its lowest since 2006.
