UK House Prices Situation at 7 12 2007: Stagnation or reduction in most areas

UK House Prices Forecast: Continued general falls nationwide

Nationwide Report Biggest Fall for 12 Years

One of the UK's largest mortgage lenders has just reported a 0.8% fall in average house prices in the last month. This takes the annualised growth rate to just 6.9% - down from 9.7% in October.

Nationwide's monthly House Price Index survey showed that average house prices across the UK had fallen from £186,044 in October to £184,099 in November. Nationwide Chief Economist Fionnuala Earley commented:

"November’s data confirms that the housing market is indeed cooling in line with the weakening in housing market drivers. Poor affordability, weaker house price growth expectations and the effect of earlier increases in interest rates have all affected demand in the market."

Land Registry Figures Show Almost No Change

The Land Registry also updated its House Price Index last week, publishing data for October, 2007.

Although the Land Registry HPI is considered extremely authoritative - it includes all property sales, not just mortgaged sales - it relies on data from completed sales, meaning that it tends to lag behind the indices such as Nationwide's.

That lag suggests that the Land Registry's overall change of 0.1% is consistent with the fall in the average price recorded by Nationwide. It seems likely that the next update of the Land Registry HPI will show a fall in the average price, as have almost all other HPIs in the last month.

City Forecasts 7% Fall In 2008

An alternative method of gauging the future of the housing market might be to look at the prices of residential property derivatives - a new form of futures contract introduced to the financial markets earlier this year.

Prices at present show that traders expect house prices to fall by 7% in 2008, followed by a period of up to five years during which prices will stagnate.

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