House price dip may be good news in the end for economy (times)

Wookster

The first fall in house prices for ten months could be a “positive development” that prevents the housing market from racing ahead of the general economy, Britain’s biggest building society has said.

House prices went into reverse in February, falling 1 per cent on the previous month, as factors such as the snow and the expiry of the stamp duty holiday discouraged buyers and pushed down prices, according to Nationwide. The average price of a property in February was £161,320.

House prices rose by 1.4 per cent in January. However, Martin Gahbauer, Nationwide’s chief economist, said it would have been surprising if house prices had maintained the upward momentum seen for most of last year.

“In light of low growth in household incomes and elevated levels of unemployment, house prices were beginning to move ahead of the general recovery. With the long-term stability of the market in mind, it would be a positive development for house prices not to race too far ahead.”

House prices surprised many commentators by remaining relatively buoyant throughout the second half of 2009, after falling by an average of 20 per cent from peak to trough.

Mr Gahbauer added that the “pause” in price rises would come as a relief to first-time buyers no longer benefiting from stamp duty relief on properties costing £125,000 to £175,000.

First-time buyer mortgages hit a two-year high in December as buyers rushed to beat the end of the stamp duty holiday, according to recent data from the Council of Mortgage Lenders. However, in January, gross mortgage lending fell to an estimated £9.1 billion, a 32 per cent drop on the previous month.

Mr Gahbauer said it was difficult to gauge whether the February fall was a temporary blip or the start of a new downward trend.

The February decline is the sharpest since the same month last year, when there was a 1.5 per cent fall month-on-month. This month the annual rate of price inflation increased to 9.2 per cent, because of a steeper monthly decline last year.

The falls will come as a surprise to prospective sellers expecting growth, after Nationwide said that if prices continued to rise they would soon move into double digits on an annual basis for the first time in three years.

Howard Archer, of IHS Global Insight, said it was important not to infer too much from one month’s figures, pointing to the three-month measure, from December to February, which showed a 1.6 per cent rise overall.

Meanwhile, Rightmove reported record full-year profits yesterday. The property website recorded profits after tax of £30 million, up from £25.5 million in 2008, a result that it attributed to a change in house hunter habits.

Ed Williams, its managing director, said: “To say it turned out better than expected would be a massive understatement: 2008 was the worst property market situation since the Second World War.

“It’s still a very tough market for housebuilders and estate agents.”

http://www.timesonline.co.uk/tol/money/property_and_mortgages/article7043178.ece

abaxas

Agreed,

A market working correctly is always better then an artificial one.

luvpump

Good for the economy & the most important thing.. good for our society IMO ..