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Nationwide's January House Price Survey says: -New Year sees little change to recent house price trend



"The price of a typical house fell by a further 1.3% in January, as the deepening economic recession and financial market turbulence continued to weigh on housing market sentiment and activity. January’s decline leaves the average price of a typical house at £150,501, down 16.6% from 12 months ago. The 3-month on 3-month rate of change, a smoother indicator of the short-term trend in prices, improved for the fourth consecutive month from -4.2% in December to -4.0% in January. However, it is too early to say that this marks the start of a sustained improvement in the short term trend. 

Housing market activity still subdued

"Levels of activity in the housing market have remained very low in recent months. Mortgage approvals for house purchase fell to a record low of 27,000 in November, and partial figures for December suggest there has only been a small improvement since then. House purchase approvals have historically been a good lead indicator of house price movements, and we would not expect to see a stabilisation of property prices until approvals recover significantly from current levels.

In the past, approvals have tended to move in line with new buyer enquiries at estate agents. More recently, however, the relationship between buyer enquiries and approvals has broken down, with buyer enquiries recovering quite strongly in recent months while approvals have shown little sign of recovery.

"There are several possible explanations for why higher buyer enquiries have not translated into higher approvals. First, those enquiring about properties in the current economic environment are unlikely to be doing so with the same level of urgency as was the case 1-2 years ago. While the fall in house prices and the parallel reduction in interest rates has probably made many households curious about what is currently available in the market, many are likely to be hesitant to commit in a recessionary environment of rising unemployment and increasing uncertainty about future incomes.

The fact that house prices still remain high relative to earnings reinforces this more cautious approach among potential buyers. Second, mortgages have become less widely available as a result of heightened economic risk, tighter lending criteria and a decline in the number of lenders who are active in the market.

However, the increasing level of enquiries suggests that activity levels have a reasonable chance of recovering from their recent lows once an end to the recession is in sight and/or the recent government interventions lead to an improvement in the availability of credit.





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