One per cent fall in January house prices
Latest figures from the Nationwide Building Society show that in January, the cost of a UK home fell by 0.1%, taking the price of the average property to £180,473, compared to £182,080 in December.
January marked the third consecutive month in which property prices have fallen and leaves the annual rate of inflation at 4.2%, down from 4.8% in December, and to its lowest level since December 2005.
Evidence of a slowdown in the housing market is supported by other key indicators, such as mortgage approvals and estate agents’ sales-to-stock ratios, both of which have been falling.
However, there are expectations that buyer demand may have have bottomed out, as some potential buyers who have previously been priced out of the market are returning, on the strength of further interest rate cuts and the possibility of bagging a property bargain.
The level of return is tentative and Martin Gahbauer, Nationwide’s Senior Economist, point out: “As the year progresses, a key factor to watch will be how much pent-up demand returns to explore the market, and how much of this is translated into actual housing transactions”.
The Bank of England’s Monetary Policy Committee (MPC) is widely expected to reduce the base rate in February, having held it at 5.5% in January.
According to Howard Archer, chief UK economist at Global Insight, the UK housing market remains under “substantial pressure”; the economic forecasting consultancy has recently increased its forecast for a 3% drop in house prices in 2008, to 5%.