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Nationwide: The party's over

A new report highlights something that hasn’t happened in the UK for 12 years…

According to Nationwide, house prices in the UK have recorded their first annual fall for 12 years. Prices fell by 1.1% in April, the sixth monthly decline in a row, and were down 1% from the levels seen in April 2007, the building society said.  An average home now costs £178,555 which is £1,759 lower than April 2007.

Fionnuala Earley, chief economist at Nationwide, explained: "There has been a steep decline in house buying in the last six months owing to falling demand from first-time buyers, higher mortgage rates and tighter lending criteria.

“The rise in unsold property on the market has improved the bargaining power of buyers which has, in turn, pushed down prices. This is likely to have a knock-on effect on the wider economy, with consumers becoming more cautious.  

Ms Earley dismissed suggestions that the current slump was similar to housing crash of the early 1990s: “The current housing market is very different to the situation in the late 1980s and early 1990s, and the underlying conditions for most mortgage borrowers are more positive than some would suggest. Indeed, unlike the 1990s crash, more people are on fixed-rate than variable-rate mortgage deals and this helps the stability of the market”.

Not as bad as it seems?

Peter Bolton King, Chief Executive of the National Association of Estate Agents (NAEA), commented: “This needs to be put into context.  We have been experiencing huge price leaps in the housing market in recent years so overall, a 1% drop is a tiny proportion of the rise and certainly not enough to throw many people into negative equity the way we saw it in the early ‘90s. 

“In addition, a national picture can only tell a bit of the story.  We can see from other surveys that the picture is mixed across the country and some areas will be more affected than others, so people really need to look to their local markets to get a true picture. 

“There is no denying that the credit crunch has affected confidence in the market but it is still important to remember that the underlying factors that support the property market remain: low unemployment, historically low interest rates and a pent-up demand for houses.”

Figures are no surprise

Dan Johnson, Managing Director of TheMoveChannel.com, was unsurprised by the latest developments: “While it may be the first time that Nationwide has reported a price fall, it's not exactly going to be shocking news for anyone that reads this report.

“The only surprise is that it has taken this long for the reality of the UK housing situation to impact the Society's statistics.

”Given that the data is based on mortgage completions, it would be interesting to know a little more about the extent to which the sample size has been reduced and whether this has amplified or minimized the current trend".