House Price Update to 26 June 2009

UK House Prices Situation: Prices still falling, albeit slower

UK House Prices Forecast: Further price falls due before bottom reached

Housing Market Activity Slightly Improved

New figures this week highlighted a rise in mortgage approvals compared to the same month last year. The latest figures published by the British Bankers Association (BBA) showed a 15% rise in mortgage approvals for house purchases in May from the same month a year ago. That’s good news for the housing market, suggesting that activity levels are increasing somewhat

New Figures Indicate Prices Still Falling

The latest Rightmove House Price Index was published this week, showing that asking prices have fallen slightly in June, dropping 0.4% after 4 months of rises.

Despite this, asking prices are still up by 6% in 2009 – although this increase is not necessarily reflected in actual sale prices. The latest Land Registry House Price Index, published today, shows that actual sale prices fell by an average of 0.2% in May – the same month that Rightmove recorded asking prices rising by 2.4%.

Prices Still Have Further To Fall

House price affordability remains above its long-term average. This means that prices almost certainly still have further to fall. The market certainly thinks so, anyway. A survey of 35 economists by Reuters this week found that on average, they expect to see a further 8% reduction in house prices before prices finally bottom out.

That’s consistent with results seen in the property auction market. Prices for property sold at auction are currently around 11% lower than prices achieved on properties sold through estate agents. This discount has reduced substantially this year – it was 40% at the beginning of 2009 – but still shows that auction buyers believe that property prices have further to fall.

When auction prices start matching estate agent prices, then that will be a strong indicator that house prices have finally bottomed out.

Read about UK House Price indexes / key statistics that track the ups and downs of house prices

Read our take on the Credit Crisis the effect on UK House Prices and Mortgages. A Special Report

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