House prices fall for second consecutive month, says Nationwide

Source: Guardian Online

House prices fell by 0.9% in August, while the three-month rate of change fell from 1.2% to 0%, Nationwide's latest index shows.

House prices fell by 0.9% in August, the second consecutive monthly fall following July's 0.5% decline, taking the average price of a home in the UK to £166,507, according to the Nationwide building society.

The decline marks the first time since February last year that house prices have fallen in two consecutive months, and analysts claim the figures are evidence of continued weakness in the housing market.

Martin Gahbauer, Nationwide's chief economist, said: "The three-month rate of change fell from 1.2% in July to 0% in August, suggesting that house prices have essentially stagnated over the summer.

"Unless house prices bounce back strongly in September the three month rate of change will turn negative next month."

The annual rate of inflation remained in positive territory at 3.9%. However, it is down quite sharply from rates of 6.6% in July and 8.7% in June, and is the lowest year-on-year rise since November.

"As more sellers have returned to the market, buyers have a greater selection of properties to choose from and more bargaining power with which to bid down asking prices," Gahbauer said.

"There is little evidence of distressed selling, however, with the Council of Mortgage Lenders' second-quarter figures showing another drop in mortgage arrears and possessions. As such, the current period of price declines is likely to remain relatively modest. Given that the price increases of the last year had gotten ahead of the recovery in the wider economy, the current correction is not an unhealthy development."

But the Nationwide figures come just days after Bank of England data showed mortgage lending falling sharply in July – the second-lowest monthly figure since the Bank's records began in 1993. Only 48,722 mortgages were approved for house purchase during July, and net lending by mutuals remained in negative territory at -£379m in July compared with -£432m in June.

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