An increase in the number of properties available for sale led to residential real estate prices unexpectedly falling by 1.5% in February, the first drop since June last year, according to the latest index. The decline followed a downwardly revised 0.4% rise in January and left prices 4.5% higher in the three months to February compared with a year ago, according to the index from the Halifax.
The report says that increased supply, poor weather and the end of a tax holiday for some homebuyers had all contributed to the fall, though it noted property prices were still 8% higher than in April last year. ‘An increase in the number of properties available for sale has helped to reduce slightly the imbalance between supply and demand,’ said Halifax’s housing economist Martin Ellis. ‘At the same time, the bad weather in the first two months of 2010, together with the return of the lowest stamp duty threshold to £125,000, are likely to have had an adverse impact on housing demand,’ he added. Halifax said the average price of a home stood at £166,587 in February.
The index is the latest in a string of figures to point to a cooling in the UK property market. The Nationwide building society reported a 1% fall in prices last month and Bank of England figures showed mortgage approvals fell to an 8 month low in January. ‘In general housing indicators have been cooling off of late,’ said Alan Clarke, UK economist at BNP Paribas. However, Hometrack reported a 0.3% rise in house prices in February, compared to January. And in some parts of the country prices just keep rising, most notably London and the south east.
According to Hometrack February also saw the first year-on-year rise since March 2008, at 0.4%, and the survey shows prices rising across 25% of postcodes, a level not seen since 2007. However, Hometrack warns that the market currently lacks solid foundations. For example, the number of sales agreed increased by just 10% in February, compared with an average 30% over previous years. Furthermore, the supply of homes for sale rose by 4.6%, against an average increase in previous years of 14%, and buyer registrations were up by 8.3%, compared to an average of 24% in the same month over the last eight years.
The typical time needed to sell a property extended to 8.6 weeks, although the proportion of asking price achieved rose from 88% a year ago to 93.8% today. ‘A shortage of properties for sale has supported prices over the last 12 months but there is a danger that the pressure to gain instructions may result in the gap between asking and achieved prices starting to widen again,’ the Hometrack report said.