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House prices fall but pace eases House prices fall but pace eases
(about 2 hours later)
The slump in house prices eased off in November with prices falling by just 0.4%, according to the Nationwide, the UK's largest building society.The slump in house prices eased off in November with prices falling by just 0.4%, according to the Nationwide, the UK's largest building society.
The mortgage lender said the rate of price falls "moderated significantly" when compared with October's 1.3% fall.The mortgage lender said the rate of price falls "moderated significantly" when compared with October's 1.3% fall.
House prices are down 13.9% from November 2007, easing from a 14.6% annual fall in October.House prices are down 13.9% from November 2007, easing from a 14.6% annual fall in October.
However, Nationwide warned that the weak economy would continue to put pressure on the housing market.However, Nationwide warned that the weak economy would continue to put pressure on the housing market.
"In spite of the moderation in house price falls recorded in November, with the economy in recession, conditions do not appear very favourable for a swift recovery in the housing market," Nationwide's chief economist Fionnuala Earley said."In spite of the moderation in house price falls recorded in November, with the economy in recession, conditions do not appear very favourable for a swift recovery in the housing market," Nationwide's chief economist Fionnuala Earley said.
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"With prices falling at their current rate, there is also less incentive for new borrowers to hurry into the market.""With prices falling at their current rate, there is also less incentive for new borrowers to hurry into the market."
The price of an average house now stands at £158,442, the Nationwide said.The price of an average house now stands at £158,442, the Nationwide said.
That amounts to a drop of £25,000 in the past year, although the building society says prices are still £25,000 higher than they were in November 2003.That amounts to a drop of £25,000 in the past year, although the building society says prices are still £25,000 higher than they were in November 2003.
Lending fearsLending fears
The past year has seen the UK property market endure one of its biggest and most sudden slowdowns on record.The past year has seen the UK property market endure one of its biggest and most sudden slowdowns on record.
It is estimated that the UK house building industry has shrunk by half since the start of the international credit crunch in the summer of last year.It is estimated that the UK house building industry has shrunk by half since the start of the international credit crunch in the summer of last year.
November's moderate fall in house prices is not a sign that the housing market is bottoming Capital EconomicsNovember's moderate fall in house prices is not a sign that the housing market is bottoming Capital Economics
Earlier this week the former head of the HBOS mortgage bank, Sir James Crosby, recommended that the government take direct action to stimulate the flow of mortgage funds to the UK banking industry.Earlier this week the former head of the HBOS mortgage bank, Sir James Crosby, recommended that the government take direct action to stimulate the flow of mortgage funds to the UK banking industry.
He warned that otherwise new mortgage lending might dwindle to a complete halt.He warned that otherwise new mortgage lending might dwindle to a complete halt.
And that in turn would lead to a further downward spiral of sales and prices which would make the impending economic recession even worse.And that in turn would lead to a further downward spiral of sales and prices which would make the impending economic recession even worse.
In evidence to a Parliamentary committee, Mervyn King, the governor of the Bank of England, said no issue was more important at the moment than the restoration of general bank lending.In evidence to a Parliamentary committee, Mervyn King, the governor of the Bank of England, said no issue was more important at the moment than the restoration of general bank lending.
"The government's massive fiscal boost may prevent the downturn in economic activity being as severe as would otherwise be the case but it will not prevent a sharp jump in unemployment over the coming year," said Simon Rubinsohn of the Royal Institution of Chartered Surveyors (Rics).
"The real issue for the property market remains the collapse in transactions rather than the necessary adjustment in prices," he added.
Further fallsFurther falls
David Miles, chief UK economist at the investment bank Morgan Stanley, said there had been some good news in the past few weeks.David Miles, chief UK economist at the investment bank Morgan Stanley, said there had been some good news in the past few weeks.
"We have had some very substantial cuts in interest rates from the Bank of England," he said."We have had some very substantial cuts in interest rates from the Bank of England," he said.
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"That will feed through to lower costs of mortgages, for those who already have a mortgage anyway, pretty soon," he added."That will feed through to lower costs of mortgages, for those who already have a mortgage anyway, pretty soon," he added.
But the consultancy Capital Economics said the Nationwide's figures were unlikely to herald an upturn.But the consultancy Capital Economics said the Nationwide's figures were unlikely to herald an upturn.
"November's moderate fall in house prices is not a sign that the housing market is bottoming," it said."November's moderate fall in house prices is not a sign that the housing market is bottoming," it said.
"With the economy set for a deep recession and unemployment rising steeply, we expect the sharper downward trend in house prices of recent months to reassert itself," it added."With the economy set for a deep recession and unemployment rising steeply, we expect the sharper downward trend in house prices of recent months to reassert itself," it added.
The gloomy outlook was supported by the West Bromwich building society, the UK's seventh largest.The gloomy outlook was supported by the West Bromwich building society, the UK's seventh largest.
Reporting a 65% fall in half-year profits to £8m, it forecast that house prices would fall further in 2009.Reporting a 65% fall in half-year profits to £8m, it forecast that house prices would fall further in 2009.
Fearing that some of its borrowers may start defaulting on their mortgages in increasing numbers, the society set aside a further £7.5m to cover potential bad debts, even though its arrears are currently lower than the industry average.Fearing that some of its borrowers may start defaulting on their mortgages in increasing numbers, the society set aside a further £7.5m to cover potential bad debts, even though its arrears are currently lower than the industry average.