House prices may be stabilising, according to figures from the Nationwide building society.
The lender said the cost of the average UK home rose by 0.3% month-on-month to February leaving prices just 0.1% lower than this time last year. The average UK house now costs £161,183.
Prices were broadly flat according to the Nationwide’s quarterly figures, seen as a smoother indicator of market trends, but the building society warned that it saw little room for optimism in the short to medium-term.
It said that a continuing lack of first-time buyers is continuing to hold the market back and that there is little prospect of numbers returning to pre-financial crisis levels any time soon.
Robert Gardner, Nationwide’s chief economist, said: “With the supply of housing fixed in the short term, the flow of new buyers into the market has a major impact on prices and activity. The fact that first-time buyer numbers are well below the levels prevailing before the financial crisis casts a shadow over the outlook for the wider market.”
First-time buyers are generally younger and have therefore been harder hit by job losses. Youth unemployment stood at 18% at the end of last year and 20% of graduates are jobless. The national average rate currently stands at 7.9%.
The Nationwide calculates that a prospective buyer earning the average salary would take eight years to save enough for a typical deposit of 21% if putting aside 15% of their salary every year.
Mr Gardner went on to say that February’s figures were not much of a surprise and that prices were likely to remain flat in the current economic climate: “Housing market trends are closely linked to wider economic prospects.
“Given that the recovery hit a soft patch at the turn of the year and looks set to remain sluggish in the year ahead, the property market is likely to follow suit with relatively low transaction levels and prices moving sideways or modestly lower through 2011.”
Howard Archer, chief UK and European economist at IHS Global Insight, said: “The modest rise in house prices in February is slightly surprising, but does not markedly alter the impression that the housing market remains under serious pressure.
“What it does suggest to us, though, is that house prices are more likely to trend down gradually over the coming months rather than crash. This ties in with our long-held suspicion that house prices are likely to fall by around 5% in 2011 and end up losing about 10% from their peak 2010 levels before stabilizing.”
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