The pace of decline of UK house prices slowed between October and November, a survey from building society Nationwide showed yesterday, but experts did not believe this represented the start of a bottoming-out of the residential property market given the dire economic backdrop.
Nationwide said yesterday that the average UK house price had fallen by 0.4% this month to £158,442, after dropping by 1.3% in October. House prices in November were 13.9% lower than in the same month last year, a marginal improvement from a 14.6% annual pace of decline in October.
But Fionnuala Earley, Nationwide's chief economist, said: "Poor economic conditions will continue to put pressure on the housing market In spite of the moderation in house price falls recorded in November, with the economy in recession, conditions do not appear very favourable for a swift recovery in the housing market.
"The labour market is weakening, which will inevitably hinder market demand, particularly when property remains expensive relative to earnings. With prices falling at their current rate, there is also little incentive for new borrowers to hurry into the market."
Earley did, however, highlight the part which sharp cuts in UK base rates and Chancellor Alistair Darling's £20bn fiscal stimulus could play in softening the impact of deteriorating economic conditions on house prices.
The Bank of England has cut UK base rates from 5% to 3% since October.
Seema Shah, property economist at consultancy Capital Economics, said: "November's moderate fall in house prices is not a sign that the housing market is bottoming. With the economy set for a deep recession and unemployment rising steeply, we expect the sharper downward trend in house prices of recent months to reassert itself."
She added: "House prices have now fallen for 13 consecutive months We do not take much comfort from November's more moderate fall in house prices. Monthly house price indices are volatile. Indeed, while the 1990s housing market crash spanned over several years, the longest run of consecutive monthly house price falls was only seven months.
"What's more, the apparent moderation in house price declines is contrary to anecdotal evidence which has been suggesting that house price falls have, if anything, intensified in the past six to eight weeks."
Capital is among the most pessimistic on the housing market outlook.
Shah, noting UK house prices were down 14.8% from their October 2007 peak on the Nationwide numbers, said yesterday: "The upshot is that house prices still have some way to fall. We expect house prices to fall a further 25% by late 2009."
Meanwhile, a survey published today by private sector research organisation GfK NOP shows UK consumer confidence remained close to record lows in November.
GfK NOP's consumer confidence index rose by one point between October and November to minus-35.
Rachael Joy, who works in GfK NOP's consumer confidence team, said: "The consumer confidence index has improved marginally this month, but continues to languish at near-record lows. UK consumers are still being battered by news about our poor economy in general and mounting concerns about job losses in particular.
"The dramatic cut in interest rates this month (one-and-a-half percentage points on November 6) appears to have done little to improve sentiment so far, as UK consumers continue to fret over the impact of a looming recession. Consumers are treading water and waiting for the economy to stabilise after what has been a turbulent few months."
Remarks from Bank of England Monetary Policy Committee member Tim Besley, published yesterday but made at an International Monetary Fund conference on November 14, highlighted his concerns about the impact on the economy of "credit-rationing" by the banks. He said: "The major issue is to prevent undershooting. Banks are now being extremely cautious."
Bank of England Governor Mervyn King warned on Tuesday of "direct" government intervention as a last resort to restore normal levels of bank lending if the current tax-payer-backed recapitalisation of this sector failed to produce this result and did not rule out more widespread nationalisation in this context.
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