UK house prices fell by 0.2% in September while the annual rate of house price growth is 1.8%, the lowest since May 1996, according to a report by Nationwide.
The report says softer price growth and lower interest rates have renewed buyer interest and predicts house prices will remain stable for some time.
Fionnuala Earley, Nationwide’s group economist, says: “Since the end of 2004 the monthly data has been relatively mixed, with several months of small falls and rises, but looking at changes over three months shows the underlying trend more clearly.
“According to this measure, house prices growth stalled in the three months to September, with no increase on the previous three months,” she says.
But, Earley adds, house prices are still higher than at this time last year. The price of an average house in the UK is now £156,517 compared to £153,727 last year.
The report says house price to earnings ratios are significantly above levels of the early 1990s which has led many commentators to predict a bursting bubble and a subsequent housing market crash.
But Nationwide argues experience so far shows no evidence of an imminent crash instead, it says, the housing market has remained fairly robust and, as house price growth has softened, buyers have shown renewed interest in the market.
Nationwide says the number of house purchase approvals increased to 97,000 in July, their highest level for a year and just above the average for the last 12 years.
“We expect house purchase approvals to remain at around this trend for the rest of the year, as declining rates of growth of house prices help add liquidity to the market,” says Earley.
“Estate agents have consistently reported increased buyer interest over the last few months, which should help to support the market going forward.”
Although the equilibrium house price to earnings ratio may have increased, Earley says it is unclear whether this is its new natural level “and we may still expect affordability to act as a brake on the market for a while to come”.
She points out “while house prices and activity have been well behaved, current levels of uncertainty in the macro-economy mean that this could change”.
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