House prices fell by 0.5% in February, the fourth consecutive monthly decline, according to the latest survey from Nationwide. The annual rate of house price inflation fell from 4.2% to 2.7%, the lowest since November 2005.
[UKPRwire, Mon Mar 03 2008] The 3-month on 3-month rate of price growth rate fell to -1% in February, a sharper decline than the previous 3-month figure of -4% the previous month. The average price of a typical property is now £179,358, an increase of £4,653 over the last 12 months.
The trend was also confirmed by figures released by the Land Registry, which showed a slowdown in the annual rate of house price inflation.
However, Nationwide’s chief economist Fionnuala Earley said that although prices are weakening, “the size of the drop in the annual rate between January and February perhaps overstates the rate of cooling as it partly reflects the particularly strong increase in prices in February last year”, and that the outlook is one of slower economic growth rather than recession.
As the economy weathers the aftershocks of the credit crunch, lenders have tightened criteria for borrowers, with the 100% mortgage market shrinking significantly in recent months. Existing homeowners are favoured by lenders over first-time buyers, so the latter category remains disadvantaged in terms of getting a foothold on the property ladder, a situation exacerbated by rising food and energy costs which put a further strain on household finances.
“While there is no doubt that the economy has weakened over the past year, the slowdown in the property market reflects a period of re-adjustment after the above-average growth of the past decade,” said Lawrence Smith of Decision Homebuyers. “Times remain hard especially for first-time buyers and those looking to sell their property, as demand continues to weaken, and we are unlikely to see a return to previous levels of demand for some time.”
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