Property prices in the UK fell in August for a second consecutive month prompting fears of increasing weakness in the housing market. The figures from the Nationwide building society show that prices fell by 0.9 per cent last month, the first time values have fallen in consecutive months since February 2009.
Martin Gahbauer, Nationwide’s chief economist, said: “The three-month rate of change fell from 1.2% in July to 0% in August, suggesting that house prices have essentially stagnated over the summer.
“Unless house prices bounce back strongly in September the three month rate of change will turn negative next month.”
Mortgage lending also falling
Bank of England figures support the suggestion that the housing market is in trouble. July’s mortgage lending figures showed the second lowest month of mortgage lending since records began in 1993 with just 48,722 mortgages approved for house purchases. Lending by mutuals continued to be negative, meaning they are lending less than their borrowers are paying back.
Prospects look gloomy
Some experts are now predicting that property prices at the end of 2011 will be 10 per cent lower than the levels they were this summer. Howard Archer of IHS Global Insight told The Guardian, “The recent overall tone of housing market data and surveys has been consistently downbeat. We currently expect house prices to fall by 3% over the second half of the year, but there is a now a very real likelihood that the drop will be nearer 5%.
“It is hard at this stage to be optimistic about house prices in 2011 as the fiscal squeeze will increasingly kick in, which will hit people’s pockets and lead to serious job losses in the public sector. Consequently, a further drop of around 5% in house prices looks highly possible in 2011, and the drop could well be steeper still.”