House prices continue to fall
Latest figures from Nationwide show that house prices fell again last month, with the average price falling by 0.3% to £163,398.
Commenting on the figures Martin Gahbauer, Nationwide's Chief Economist said there is little evidence to suggest that house price declines are likely to accelerate in the months ahead.
"Much of the weakness in property values since the Spring has been driven by a return of sellers to the market, following unusually low levels of property for sale in 2009 and early 2010," he said, adding "However, there is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest."
Gahbauer pointed to early signs that the flow of new property onto the market may be slowing down again as potential sellers observe the recent weakness in prices and decide against marketing their properties at the current juncture.
"Similar seller behaviour was observed in late 2008 and early 2009, eventually leading to a decline in the amount of property on the market," he said.
Peter Rollings, managing director of estate agent Marsh & Parsons, said that Nationwide's statistics paint a gloomy picture for the UK's housing market when contrasted to the sharp gains in prices seen earlier in the year.
"Nationally, the key issue remains mortgage finance," said Rollings, adding: "The freeze in lending is still keeping thousands of first-time buyers out in the cold, and this must be addressed to re-ignite the recovery in most parts of the UK."
Meanwhile, a residential lettings survey by Royal Institution of Chartered Surveyors (RICS) shows that rents are still rising as more people are unable to secure mortgages.
"The lettings sector has become increasingly strong over the past nine months, in contrast to the housing market which continues to slow," said Jeremy Leaf of RICS.
"Many have turned to the rental market because they fear further price reductions in the housing market, or because they cannot obtain the necessary finance to buy," he added.
The contraction in UK mortgage lending since 2007 has been the most severe on record. In both 2008 and 2009, fewer than 520,000 loans for house purchase were granted – lower than in any year since 1974 according to data from the Council of Mortgage Lenders (CML).
It says that the fall in lending is even more dramatic when measured by value, rather than volume. In 2009, gross lending for house purchase totalled £70 billion, 55% below the 2007 figure of £155 billion. Over the same period, net mortgage lending fell from £108 billion to £12 billion and a further decline is expected in 2010.
But, as the CML points out, even as the capital markets start to recover, it is clear that credit supply, risk appetite and competition are not likely to return to "normal" any time soon.
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