House price fall for fourth month

ESTATE agents have warned that house prices have fallen for a fourth consecutive month.

The National Association of Estate Agents said values fell 1.6% in September.

It added that prices looked 'historically high' and unachievable for many people looking to get on to the property ladder. The percentage of first-time buyers fell to a record low of 8.9% last month, down from 21% at the beginning of the year.

Buyers also continued to haggle. The average discount on asking prices, which has climbed from a low of 2.1% in the past six months, rose to 5.5%. But the association insisted a price crash was a 'very unlikely prospect'.

Meanwhile, online estate agency Rightmove said the annual rate of increase in asking prices dropped from 16.4% in September to 13.4% in October, the steepest month-on-month fall for more than a year.

But it said the average asking price held up well, moving 0.6% ahead to £193,536 from last month's figure.

The average time it took to sell rose to 10 weeks, up from 7.5 weeks in the spring.

Miles Shipside, commercial director at Rightmove said homeowners who price their properties at the correct level were still able to sell.

He said: 'We continue to see a moderation in house price inflation, as wiser sellers adopt a more realistic view of the value of their homes.

'This shows that the successive interest rate rises, culminating in the final quarter-point increase on 5 August, had their desired effect of skimming the froth off the housing market.'

The Bank of England has raised the UK base rate from a 48-year low of 3.5% last year to 4.75%.

Rightmove's figures show that the annual rate of house price inflation dropped most markedly in the North (from 31.3% to 21.6%), East Anglia (from 14.4% to 5.2%), the South West (from 17.1% to 10.6%) and Greater London (from 10% to 6.9%).

Despite today's gloomy figures, an influential economic think-tank said a price crash in the UK was 'remote'.

Ernst & Young's Item Club, which uses the same forecasting models as the Treasury, discounted recent suggestions of a 20%, or even 40%, fall in prices and said that a 'soft landing' was much more likely.

The Item Club's chief economic adviser, Peter Spencer, said: 'Forecasts of crash and burn in the housing market will yet again turn out to be wide of the mark. After all, inflation and interest rates remain at a historically low figure and as our summer forecast confirmed, we are close to full employment in the UK.'

Also today, research from City broker Keefe, Bruyette & Woods said the base rate, currently 4.75%, would have to rise to 9% before mortgage repayments returned to the 'afforability constraints' of the early Nineties, when prices crashed. It added that the base rate would have to hit 6.1% before average income from buy-to-let was wiped out.

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