UK home prices in sharp fall
U.K. house prices fell sharply in October from September while the year-to-year pace of house price growth rose at the slowest pace for more than a year, the Nationwide Building Society said Thursday.
According to the mortgage lender, house prices fell a seasonally adjusted 0.7% from September and were 1.4% higher compared with October 2009. The latter number was also the lowest annual increase since September 2009, when house prices were flat.
In September, Nationwide said house price were unchanged on the month and grew 3.1% on the year. Nationwide originally reported house prices increased 0.1% on the month in September.
The data were weaker than expected. Economists surveyed by Dow Jones Newswires last week had estimated that prices fell 0.4% on the month and grew 2.1% in year-on-year terms.
“October saw a continuation of the modest downward trend in house prices that began at the start of the summer,” said Martin Gahbauer, Nationwide’s Chief Economist. “If the recent trend in house prices were to continue through November and December, the annual rate of house price inflation would drop to between 0% and -1% by the end of 2010. This would compare to a rate of +5.9% at the end of 2009,” he said.
The report also showed that in the three months to October, U.K. house prices fell 1.5%, the biggest quarterly drop since April last year and compared with a 1% fall in the three months to September.
The data are broadly in line with other recent house price surveys reporting a slower pace of annual price growth, with economists continuing to expect little change in prices over the course of 2010.
Further monthly price declines are expected as the impact of the government’s strict austerity budget is felt next year through public sector job cuts and pay freezes as well as the 2.5 percentage points increase in the U.K.’s sales tax.
Nationwide’s Mr. Gahbauer also mentions the possibility of a further round of the Bank of England’s quantitative easing program and what impact, if any this could have on house prices. He said the strength of the various effects from the previous round of bond-buying “is very difficult to quantify,” adding “On balance, however, it is reasonable to expect that a resumption of quantitative easing would provide some offsetting support (against government spending cuts) to the housing market.”
The Bank of England had been expected to extend its bond-buying program as soon as its November meeting next week, but, in light of the stronger than expected third quarter economic performance, economists now expect that additional support to be delayed until some time next year.