House prices continue downward trend

House prices continue downward trend

The annual rate at which house prices are falling increased to 12.3% in February, official figures showed today, with the biggest falls at the bottom of the market.

The government's department for communities and local government said UK house prices dropped by 4.8% over the three months to February, compared with a 4.3% fall in the previous quarter. The acceleration in falls drove up the annual rate of deflation from the 11.5% recorded in January.

The figures, which are not seasonally adjusted, showed the average price of a UK home fell by almost £20,000 in the five months since September to £189,813.

First-time buyers have benefited most from the falls, with the average price paid by someone taking their first step on the property ladder down 15.1% on last February's figure. However, with the average still at £135,702, many would-be buyers are struggling to get a loan.

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Mortgage conditions have loosened since February, with lenders increasingly offering loans for those with just 10% to put down as a deposit. But at the beginning of the year many buyers would have needed to raise at least 25%, meaning first-time buyers needed a downpayment of more than £30,000 to afford a home.

According to the communities department's index, the annual rate of price falls for movers was 11.2% in February compared with 10% in January. The average price paid by an owner-occupier dropped to £223,133.

England remains the most expensive part of the UK in which to buy a home, with an average price of £195,657, although this masks a huge variation in prices between London, where the average was down 12.2% at £293,401, and the north-east, where prices dropped 13.3% to £131,974.

Wales, which saw the smallest annual decrease at 8.6%, has the lowest average house price at £144,762.

The figures, which are based on completed sales, lag other indices produced by lenders and estate agents. More recent snapshots of the market have in general continued to show prices falling, although Nationwide last month reported a surprise month-on-month increase. Such volatility is common, however, when the number of transactions is so low.

Today, the Royal Institution of Chartered Surveyors said interest from buyers had increased for the fifth month in succession, but that borrowers are still struggling to raise mortgages and lending remains at a historical low.

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