Nationwide Forecasts a New Decline in UK House Prices

According to the latest house prices report published by Nationwide, British house prices in October 2009 outperformed those in October 2008, thus marking the first year-on-year rise in 19 months. Nationwide estimated that an average UK house was priced at £162,038 in October 2009, which figure represents a 2% rise on the house prices level for October 2008. However, it has been noted that the pace at which house prices have been rising in the previous months slowed down to 0.4%, which means that soon UK property values might start declining again. In the opinion of Nationwide property specialists, the decreased pace of house price rises might well be caused by the growing number of homesellers returning to the British property market. Let us remind, that experts explained the recent increases in house prices mainly by restricted supply of marketed properties and by high demand from potential buyers. Despite the fact that, according to Nationwide’s estimates, UK house prices have been rising for 6 consecutive months, the month-on-month data is not considered a reliable indicator, unlike quarter-on-quarter data, which showed that quarterly increases in house prices fell to 3.4% in October from 3.8% in September. Mr. Martin Gahbauer, chief economist at Nationwide, said the building society was not surprised to see a decline in the pace of house price increases as organisation’s experts did not expect significant increases in house price, registered during the summer months, to be sustainable. He added that another factor speaking in favour of a future house price decline is a too rapid and a too significant rise in UK house prices, which exceeded the expectations of consumers. Though the possible decrease in UK house prices might be perceived as bad news by house sellers, Mr. Gahbauer is determined that this is a positive sign for house buyers and borrowers as mortgage interest rates are expected to stay at historic lows for another year.