Rise in house prices grinds to sharp halt

THERE was further proof that the property market is cooling down yesterday, after government figures showed house prices were flat on the month in June.

Figures from the Department for Communities and Local Government (DCLG) showed that seasonally adjusted average prices were unchanged across the UK in June. That cut the annual rate of increase to 9.9 per cent, compared to 10.6 per cent in May.

The non-seasonally adjusted average house price now stands at £210,775, DCLG said.

The downbeat numbers chimed with pessimistic data from the Royal Institute of Chartered Surveyors (RICS), which yesterday reported the first fall in house prices for a year.

RICS said the balance of surveyors reporting a rise in house prices retreated sharply to -8 per cent in July, compared to +8 per cent in June and +21 per cent in May.

“Expectations for house price increases have also turned negative, with 28 per cent more surveyors expecting prices to fall over the coming months,” RICS said.

Howard Archer, chief UK economist at IHS Global Insight, said the numbers confirmed his belief that house prices would fall by around three per cent in the second half of this year, before falling further in 2011.

That means house prices are likely to be some eight to ten per cent lower by the end of 2011 compared to mid-2010 levels, he added.

He said: “It is hard at this stage to be optimistic about house prices in 2011 as the fiscal
squeeze will increasingly kick in, which will hit people’s pockets and lead to serious job losses in the public sector.”

House prices started to increase in the spring of 2009, due to a shortage of homes being put up for sale. But the balance of supply and demand has now been reversed.