House prices 13% below 2007 peak, Nationwide
Nationwide continues to expect only a “modest recovery” in the quarters ahead, both for the UK economy and the housing market.
UK house prices declined for the fourth time in five months, with July prices falling by 0.7 per cent, pushing the annual pace of price growth down to -2.6 per cent from -1.5 per cent in June, data from Nationwide reveal.
Last month the average property price was £164,389, according to Nationwide’s housing price index.
Data released last week revealed the UK recession intensified in the three months to July, with the economy contracting by 0.7 per cent quarter on quarter. Indeed, the UK economy has contracted by 1.4 per cent over the past nine months, and is now 4.5 percent smaller than it was in Q1 2008.
Robert Gardner, chief economist at Nationwide, said: “Against this difficult economic backdrop, it could be argued that UK house prices have shown resilience. While prices are currently 13 per cent below their 2007 peak, this is less than the declines seen in a number of other economies that have experienced similar or more robust economic recoveries.”
Along with the lack of building activity in recent years, the UK added almost 250,000 jobs in the last seven months, a rise of 0.8 per cent, even though economic output fell by more than 1 per cent over than period, Mr Gardner said.
He believes this pattern of negative economic growth and steady employment growth cannot be sustained indefinitely.
Mr Gardner said: “Much will therefore depend on the ability of the UK economy to gain momentum in the quarters ahead if labour market conditions, and therefore demand for homes, are to be adequately supported.
“The UK economy is likely to see an Olympics-related boost in Q3. The additional stimulus measures announced by the government and the Bank of England should also provide much needed support for the economy and the housing market in the months ahead.”
In early July the Monetary Policy Committee announced that it would pump another £50bn into the financial system by purchasing government bonds.
In addition, the Bank of England, in conjunction with HM Treasury, announced the introduction of the Funding for Lending Scheme, which will run for 18 months from 1 August.
Mr Gardner said: “This scheme aims to boost the availability of credit to households and firms by guaranteeing the availability and lowering the cost of the funds that banks and building societies need to do business.
“The extent to which the scheme is successful in boosting lending will depend crucially on the demand for credit.
“However, with the eurozone situation deteriorating again in recent weeks and few signs of a recovery in domestic demand, we continue to expect only a modest recovery in the quarters ahead, both for the UK economy and the housing market.”