Fall in UK house prices
House prices in the UK fell by 0.1% during October as higher interest rates and falling confidence continued to impact on the market, figures showed today.
Property information group Hometrack said it was the first time house prices in England and Wales had fallen for two years.
It added that the drop followed two months of stagnant growth, while the annual rate of house price inflation had also fallen to 4.4%.
Richard Donnell, Hometrack's director of research, said: "The fall in prices over October is not unexpected. After several months of weaker buyer confidence, falling levels of demand and declining sales volumes, prices were bound to be affected.
"We expect further small price falls in the months ahead but these are likely to remain limited as there remains no evidence of any increase in the supply of homes for sale.
"If anything the current uncertainty appears to be resulting in a decline in the numbers of homes coming to the market which is likely to support underlying prices in the coming months."
The group said house prices fell by between 0.1% and 0.2% across all regions of England and Wales except the West Midlands, where values remained unchanged.
Overall just 1.3% of postcode areas saw price rises, down from 8.6% in September.
The biggest house price falls were seen in areas of London and the South East with the most expensive properties, with prices dropping by 0.5% in central London and the City and by 0.4% in south west London and Hampshire - all areas that have registered strong price gains during the past two years.
Hometrack said a combination of rising interest rates and weaker confidence had hit key market dynamics causing potential buyers to step back from the market.
It said demand had been falling for the past four months, with new buyer registrations dropping by 17% in this period.
Unsurprisingly, this has led to a drop in sales, with completed sales falling by 4.8% during October.
It is now taking an average of 7.4 weeks to sell a property, up from a low of 5.8 weeks in May, and sellers are getting 94.3% of their asking price.
Mr Donnell said: "Overall we expect the rate of house price growth to slow further over the coming months with further small price falls likely in markets where achievable pricing levels are falling into line with demand.
"This is likely to be focused on the markets that have seen the greatest price rises over recent years with values in localised areas falling back off a high base.
"The scale of these falls is likely to be limited by a lack of supply coming to the market for sale."
Meanwhile, the centre for economics and business research (cebr) predicted the credit crunch combined with five interest rate rises in just over a year would finally cause house price growth to come to an end and would even cause prices to fall during the final part of this year and early next year.
But it said the housing market would shrug off these problems within a year and by 2010 annual growth would be back up to 7% due to the imbalance of supply and demand.
Laurent Souron, economist at cebr, said: "The market will inevitably be knocked sideways by the credit crunch, and we forecast that it will bring to an end to 29 consecutive quarters of house price growth.
"However, the market will soon shrug off these slight woes to record rates of growth in line with the recent past."
