House prices fell by 0.5% in February, the fourth consecutive monthly decline, says Nationwide. The annual rate of house price inflation fell from 4.2% in January to 2.7% in February.
The average house price in February is now £179,358, down from £180,473 in January.
Commenting on the figures Fionnuala Earley, Nationwide's Chief Economist, said: "The price of a typical house fell by 0.5% during February, bringing the annual rate of house price growth down to 2.7%. This is the fourth consecutive monthly fall in house prices and brings the annual rate of house price inflation to its lowest since November 2005. The trend in prices is clearly weakening, but the size of the drop in the annual rate between January and February perhaps overstates the rate of cooling as it partly reflects the particularly strong increase in prices in February last year. The 3-month on 3-month rate of price growth rate fell to -1% in February, down from -0.4% the previous month. The average price of a typical property now stands at £179,358, an increase of £4,653, or £12.75 per day, over the last 12 months."
The softening in UK house prices in February is not unexpected given the weakening trend in other housing market demand indicators. House purchase approvals have been falling back sharply since the autumn and the upturn in interest from new home buyers at estate agents seen in the final two months of 2007 fell back again in January. This reluctance on the part of buyers is not surprising given current uncertainties in the market and it is unlikely that we will see levels of activity returning to trend levels for some time. However, the behaviour of sellers is also important to the overall movement in house prices. Indeed, comparison with the US market, where house prices are falling rapidly, is instructive.
Taking the average stock per surveyor figure and dividing by the average sales per surveyor should give a rough measure of the number of months required to clear the existing stock of property at the existing rate of sales. A similar measure in the US leapt in the last two years and is consistent with the 10% annual house price fall in the US in 2007.
In the UK, it has been edging up, but is not at levels that have been consistent with systematic falls in prices in the past. Even if demand remains at current low levels, if fewer new sellers decide to market their properties in the UK, as was the case in January, the upturn in the UK measure should also slow. Overall, it seems clear that we will not see recent rates of growth, in either the UK economy or housing market, repeated for some time. There is currently an unprecedented amount of uncertainty about future economic conditions, but if the Bank of England's central projection that the economy continues to grow is correct, conditions for the UK housing market are perhaps less gloomy than some would have us believe.
