November decline in house prices

Nationwide, the UK’s largest building society, has published a report on house prices in November, showing that they fell at their sharpest rate in more than twelve years.

The price of an average UK home decreased 0.8% this month, representing the first decline since February 2006, and the largest drop since June 1995.

The average cost of a home is now £184,099 and the annual rise in house prices is down to 6.9%, its lowest since August 2006.

In October average house prices rose 1.1% and annual house price inflation stood at 9.7%.

Nationwide’s chief economist, Fionnuala Earley, reported that: “November’s data confirms that the housing market is indeed cooling in line with the weakening in housing market drivers.”

She names these drivers as poor affordability, weaker house price growth expectations and the effect of earlier increases in interest rates.

House purchase approvals are regarded as a strong indicator of demand and these have fallen over 20%, to 102,000, between the end of 2006 and September of this year.

Ms Earley expects “this activity to continue to fall back throughout the rest of this year, and into the next”.

Also this week, analysts at HSBC estimated that UK house prices are overvalued by around 30%, and the Land Registry (the most reliable source of house price data) reported that London house prices fell by 0.6% in October.

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