U.K. House Prices Fall Unexpectedly In September

U.K. House Prices Fall Unexpectedly In September

House prices in the U.K. declined unexpectedly in September, after rising in the previous month, as the property market in the recession-hit economy continues to be under pressure from deteriorating sentiment and tight credit conditions.

The seasonally adjusted house price index dropped 0.4 percent from August, when it rose a downwardly revised 1.1 percent increase, survey data from mortgage lender Nationwide Building Society revealed.

Economists had forecast prices to remain unchanged in September, following the previous month's originally recorded 1.3 percent gain.

Nationwide expects policy measures such as the Bank of England's Funding for Lending Scheme to provide support for activity in the housing market, going forward, by ensuring the availability of credit and lowering its cost.

The lender forecast gradual recovery for the economy over the next twelve months, with house prices remaining relatively flat or declining only modestly over the same period.

"Monthly price changes have been impacted by a number of one-off factors this year, such as the ending of the stamp duty holiday that cannot be controlled by the usual process of seasonal adjustment," Nationwide Chief Economist Robert Gardner said.

On an annual basis, house prices dropped at a faster rate of 1.4 percent in September than 0.7 percent in August. Economists had expected the rate of decline to remain unchanged. Prices fell annually for the seventh straight month.

The price of a typical home in the U.K. was GBP 163,964 in September, down from GBP 164,729 recorded in August and GBP 166,256 a year ago.

"However, labor market developments will remain of paramount importance in deciding the trajectory of house prices," Gardner added.

"There are grounds for caution on this front, as the unusual combination of rising employment and declining economic activity that was evident in the first half of 2012 is unlikely to be sustained."

Separately, the agency reported that the seasonally adjusted house price index declined 0.5 percent sequentially in the third quarter. Year-on-year, prices fell by 1.6 percent during the three-month period.

Ten out of 13 regions in the U.K. saw annual price declines during the third quarter. London had the strongest annual price increase and was the most expensive region with prices just 2 percent below their peak. Northern Ireland emerged the least expensive.

A report from the Bank of England yesterday showed that mortgage approvals secured on dwellings in the U.K. increased to 47,665 in August from 47,556 in July.

Yesterday, property monitoring site Hometrack said that the average asking price for a home in the United Kingdom dropped 0.1 percent month-on-month in September, marking the third consecutive fall.

The British economy shrank 0.4 percent in the second quarter, after contracting 0.3 percent in the first quarter and 0.4 percent in the fourth quarter of 2011, indicating the economy is in a double-dip recession.

A quarterly survey by the British Chambers of Commerce showed today that economic performance in the U.K. remains weak and inadequate, with the third quarter results slightly worse than the previous quarter.

"It is clear that the economy has been stagnant for too long, and urgent measures are needed to enable businesses to drive a sustainable recovery," the business lobby said in the report.