26
Feb
Icy start to 2010 cools markets
UK house prices fell for the first time in 10 months in February
as icy weather put off house hunters, the Nationwide building
society has said.
Average property values dropped by 1% compared with January,
with the average home worth £161,320.
But the annual rate of increase accelerated to 9.2% because
prices dropped faster a year ago.
Mortgage lending also slowed at the start of the year owing to
the hangover from the stamp duty holiday.
Blip?
The three-month on three-month comparison is generally regarded
as a smoother indication of house price trends.
This showed a 1.6% increase in the three months to February,
having slowed from 2% in January and from the peak of 3.7% in
September.
Prices surprised many commentators by remaining relatively
buoyant throughout the second half of 2009. The Nationwide said it
was difficult to gauge whether February's fall in prices was a
"temporary blip" or the start of a new downward trend.
"There is evidence from a range of indicators that the market
may have lost momentum in early 2010 as the stamp duty holiday
ended and house hunters were obstructed by the icy weather," said
Martin Gahbauer, chief economist for the Nationwide.
"Even without the impact of stamp duty changes and the snowy
weather, it would have been surprising to see house prices maintain
the very strong upward momentum seen for most of 2009."
Little increase in household incomes and relatively high
unemployment could also have put the brakes on house prices.
Mr Gahbauer said that it was a "positive development" for house
prices not to race away from these economic fundamentals.
Mortgage lending
The number of new buyers making enquiries about homes dropped at
the start of the year.
Properties in sought-after locations are in short supply
Recent figures from the Council of Mortgage Lenders also showed
that gross lending for home loans fell by 32% in January compared
with December, to a 10-year low of £9.1bn.
This lack of buyer demand fed through to the drop in agreed
prices in February, Mr Gahbauer said.
There has been widespread agreement among commentators that the
slowdown in mortgage lending at the start of the year was the
result of bad weather and the end of stamp duty relief.
The stamp duty threshold dropped back to £125,000 on 1
January, prompting a rush on mortgage approvals and completed home
sales in the final months of 2009.
The government concession, which had temporarily pushed the
threshold up to £175,000 for just over a year, had been aimed
at halting the rapid slump in the property market.
As a result, first-time buyers would welcome any slow down or
fall in house prices, as they were among the most likely to suffer
when this relief ended.
Mr Gahbauer said that, with the Bank rate at a record low of
0.5%, mortgage borrowers were sticking to variable rate home loans
- rather than signing up to fixed-rate deals - as they expected
interest rates to stay low.
In a separate survey, estate agent Knight Frank said strong
demand for second homes could cause house prices to more than
double in sought-after areas.