UK house prices fell by the largest margin in 12 years during November, Nationwide announces today.
The mortgage lender says the cost of an average home has dropped by 0.8% since last month – the first drop in price since February 2006 and the largest from one month to another since June 1995.
The annual rate of house price inflation now stands at 6.9%, down from 9.7% reported in October, and has fallen back in line with Nationwide forecasts.
The firm’s chief economist, Fionnuala Earley, says: “November’s data confirms that the housing market is indeed cooling in line with the weakening in housing market drivers.
“Poor affordability, weaker house price growth expectations and the effect of earlier increases in interest rates have all affected demand in the market.”
However, Earley adds the “sharp fall” this month can be explained by the unexpected house price strength seen last month.
“Monthly data can be volatile and the sharp fall this month is partly a reflection of the strength recorded last month and in November last year,” she says.
“A better picture of the underlying trend is captured in the three-monthly growth rate.”
According to the building society's calculations, the cost of the average property in the UK is now £186,044, nearly £12,000 more than this time last year.
All indicators seem to suggest house sales are going through a sharp downturn, while house price inflation is slowing.
Recently, reports from some of the UK's biggest banks suggested new mortgage approvals have slumped dramatically, while surveyors have a seen a continuing drop in enquiries from would-be buyers this year.
But Earley says the chances of a recession remain low.
“This [month’s fall] brings annual house price growth down to 6.9%,” she adds.
“This is back in line with the softening trend we have seen in the second half of the year and is consistent with our forecast of house price growth of 5-8% in 2007.”
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