House price slump not finished yet

Tim Wallace
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HOUSE prices fell again in February, reversing January’s rise and continuing the slow downward trend of the year.

Prices dropped 0.5 per cent in the month, following January’s 0.6 per cent rise, taking the average price to £160,118.

Over the last three months, prices are down 1.1 per cent, and 1.9 per cent on February 2012.

The fall makes houses increasingly affordable, with the price to earnings ratio sliding to 4.31, based on average full-time male earnings, from 4.32 in January and 4.46 a year ago.

Housing activity has picked up in recent months, in part due to the stamp duty holiday for first time buyers drawing to a close, but economists expect prices to fall further.

“Although the economy looks like it is returning to growth in the first quarter, the economic fundamentals still look far from rosy for the housing market with unemployment high and likely to rise further, earnings growth muted, debt levels high and the outlook uncertain,” said IHS Global Insight’s Howard Archer.

“In addition, credit conditions may well tighten, making it harder to get a mortgage.”

“In fact, some mortgage rates are now rising due to lenders’ higher borrowing costs in wholesale markets and this could well weigh down on housing market activity.”