House prices fall for second month

Interest rate rises appear to have taken their toll on the housing market as prices again fell nationally by 0.1 per cent.

09:23 23 August 2004

Interest rate rises appear to have taken their toll on the housing market as prices again fell nationally by 0.1 per cent.

The Hometrack August survey reports this fall for the second month running, continuing the gradual house price inflation reduction from a peak of 0.9 per cent in February.

First time buyer figures have also fallen by four per cent, which has not only wiped out the excess demand that has prevailed during the first half of 2004, but has now created significant excess supply.

Additionally, average sales price achieved as a percentage of asking price fell for the fourth month in a row to 94.9 per cent, down from 95.5 per cent in July, and the lowest since September last year.

The average national house price now stands at 152,100.

The average time taken to sell has risen to 5.3 weeks - up from 4.8 weeks in July, and 4.2 weeks in June.

"House prices are now very near their peak in terms of affordability and the recent housing boom now appears to be well and truly over," says John Wriglesworth, Hometrack's housing economist.

He added: "We do not, however, expect any housing market crash. Providing bank base rates remain below five per cent, present house price levels can be supported. This is being helped by banks and building societies offering mortgages at well over four times individual incomes."

Mr Wriglesworth concluded by saying: "We see house prices bumping along the plateau over the next 12 to 18 months. Our house price inflation forecasts remain at five per cent for 2004, and zero per cent for 2005."

Regionally, Surrey witnessed the largest house price falls this month followed by London North, London East and East Sussex.