House prices take yet another dive with no respite in sight

Published on Monday 9 May 2011 15:55

Property prices plummeted at the fastest annual rate for 18 months in April as low consumer confidence continued to undermine the housing market.

And house prices in Scotland are likely to fall further despite a jump in the number of home sales last month, according to a report out today from the Royal Institution of Chartered Surveyors (Rics) Scotland.

New figures from the Halifax, the UK's biggest lender, show that the price of the average UK home fell to 160,395 last month, 4.9 per cent below the level in April 2010. The Lloyds Banking Group-owned lender reported that UK house prices fell 1.4 per cent during April after being flat in March and slipping 0.9 per cent in February.

It followed the Nationwide in posting a lower house price average for April and blamed the decline on weak consumer confidence, with economic uncertainty casting a shadow over household finances.

But there was a glimmer of hope. Martin Ellis, housing economist at the Halifax, said: "Signs of a modest tightening in housing market conditions, a relatively low burden of servicing mortgage debt and an increase in the number of people in employment are all likely to be providing support for house prices, curbing the pace of decline."

Average prices were 3.7 per cent lower in the three months to the end of April than in the same period last year, the biggest drop since October 2009. The quarter-on-quarter fall also accelerated, with prices 1.2 per cent below the level of the previous quarter.

The Halifax's caution over the housing market outlook is echoed in the latest monthly Rics Scotland update. Scottish home sales increased last month, with 25 per cent more surveyors reporting higher transaction levels than saw a fall, double the March figure. But there was a slowdown in the rate at which homes were put on the market. The number of surveyors who said there was an increase in new sales instructions in April was down sharply from the previous month.

A majority of surveyors said asking prices edged downwards last month and more expect further falls over the next three months than predict an increase. The outlook is clouded by a lack of mortgage finance for first-time buyers, according to Rics, which said "cash-rich" buyers accounted for the bulk of sales.

Graeme Hartley, director of Rics Scotland, said that while the Scottish market remains "relatively buoyant", prices remain subdued."The number of newly agreed sales over the past month would demonstrate that sellers are more realistic about current property prices and it is difficult to see it picking up materially over the coming months," he said.

"Although there are signs that some lenders may be reducing their grip on the purse strings, in particular with mortgages aimed at first-time buyers, there is still a long way to go before lending levels increase enough to have any real impact.

"Economic uncertainty may also continue to weigh on sentiment for a while to come."