UK property: What's going on

The UK housing market has taken a battering so far this year, with predictions of house price falls for 2008 and the market heading to 'correction'. Sarah Routledge looks at the current state of the British housing market.

The UK housing market took a serious dive in March.

The property market slowed unexpectedly in March, dropping by 2.5 per cent according to the Halifax house price index. The news inevitably invited comparisons with the house price crash of the 1990s, as it was the biggest monthly fall since September 1992.

Things are not looking too great for those looking for a mortgage either, with several lenders pulling either a few - or in the case of First Direct to non customers, all of their mortgage products from the market.


Halifax HPI

February: House prices fall 2.5 per cent. Halifax predicts a decline in growth over 2008.

House prices in the UK fell 2.5 per cent in March, according to the latest figures from Halifax. The annual house price fall was also the biggest in 12 years.

Halifax's house price index showed house prices were only 1.1 per cent higher than a year earlier.

The bank, which is part of the HBOS group, predicted a decline in house prices over 2008 as a whole.

Martin Ellis, Halifax's chief economist, said: "Overall, we expect there to be a modest fall in UK house prices this year."

Nationwide HPI

February: Property prices slip by 0.6 per cent. Nationwide index reports fall for fifth consecutive month.

The price of a typical house fell by 0.6 per cent during March, with the annual rate of house price growth declining to just 1.1 per cent.

The building society said this brings the annual rate of house price inflation to its lowest rate since March 1996.

An average property now costs £179,110, from £179,358 in February.

Nationwide's chief economist, Fionnuala Earley, said: "Expectations of higher house prices will have undoubtedly encouraged some speculative demand in the housing market over the years, but with lower house price growth expected now and in the future, the effect will work the other way, causing at least some of this demand to fall away."

Rightmove HPI

February: Asking prices climbed 0.8 per cent. Rightmove says higher expectations are "ignoring reality".

March asking prices for UK houses rose by 0.8 per cent despite a fall in actual house prices, according to property website Rightmove.

Despite the credit crunch restricting people's ability to buy, sellers are pricing their properties remarkably close to the peak of last year's boom, Rightmove said.

New-to-the-market sellers raised their average asking prices again last month to £239,655, an increase of 0.8 per cent (£1,799).

Miles Shipside, commercial director of Rightmove, said: "Most sellers coming to the market seem to be ignoring the increased competition from other unsold properties and the challenge buyers now face in obtaining a mortgage.

"As many of these sellers are likely to be buyers themselves, they seem to be trying to bank a higher figure for their home but want a bargain when they buy. It's human nature, but in the current market, sellers should price below their competition to achieve more interest now and avoid a larger price drop later in the year."

Bank of England lending figures

February: Number of mortgages approved falls.

Net lending secured on dwellings (£7.4 billion) was in line with the increase in January but below the previous six-month average, according to the Bank of England's latest figures.

The twelve-month growth rate slowed to 9.4 per cent. The three-month annualised growth rate also slowed, by 0.2 percentage points to eight per cent.

The numbers of loans approved for house purchase (73,000) and remortgaging (111,000) were lower than in January.

Lenders are becoming more cautious following the credit crunch several lenders have withdrawn mortgage products. First Direct has suspended its entire line while others have only suspended some products.

Land Registry

February: House prices in England and Wales remained flat.

House prices in England and Wales remained static during February, with no monthly price change, according to the latest figures from Land Registry.

The average house price stands at £185,616, while London prices fell by 0.4 per cent, with the average price for a house in the capital dropping to £353,760.

The number of transactions during the period September to December 2007 averaged 90,880 per month, down from 117,301 for the same period last year.

Rics housing market survey

In February, 64.1 per cent more chartered surveyors reported a fall than a rise in house prices, an increase from 54.7 per cent in January..

The Rics house price balance dropped for the seventh month in succession signalling more than half a year of negative market sentiment.

Some 64.1 per cent more chartered surveyors reported a fall than a rise in house prices, an increase from 54.7 per cent in the previous month.

This figure is close to the historical low of June 1990 when 64.5 per cent more chartered surveyors reported a fall in house prices, Rics said.


Sarah Routledge