House price falls appear to be slowing, with the 1.3% decline in September the smallest monthly fall for seven months.
The latest house price figures from Halifax show property values have fallen 12.4% in the past 12 months to £172,108. However, Martin Ellis, chief economist at Halifax, says the overall price decrease in the three months to September (5.1%) was very similar to that in the previous quarter - indicating that the trend rate of decline may be beginning to stabilise.
However, he adds: “The ongoing pressures on householders' income, combined with the reduction in the availability of mortgage finance, however, mean that market conditions will remain challenging."
The rising cost of living – especially food and fuel price – is eating into people’s income, and combined with still-expensive property prices (in relation to earnings) has made it even harder for people to get on the property ladder.
The decline in credit availability is a further constraint on buyers, says Ellis, and as these pressures increase people will continue to struggle to buy a home. This lack of demand has caused property prices to fall for over a year.
The Bank of England’s figures show the mortgage market has shrunk by 70% between August 2007 and August 2008, with just 32,000 loans approved during the month this year. As a result, completed property sales in August 2008 were 47% lower than in August 2007.
Sheema Shah, a property economist with Capital Economics, disagrees that house price falls are slowing:
"The UK economy is still on course for a two-year contraction, buyer confidence is muted, house prices remain overvalued, and lenders are likely to remain cautious," Shah adds. "In addition, it is doubtful that interest rates on offer to new borrowers will fall as far official interest rates. The bottom line remains the same: house price falls still have much further to go."
Capital Economics says the current housing market fall has now surpassed the early 1990s slump.