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February 26, 2010
House Prices Fall in February for the First Time in Ten Months
After a snow filled January that bought much of the country and with it the economy to a standstill, house prices fell 1% in February after nine consecutive months of price rises. The British Bankers’ Association reported that the number of mortgages approved for house purchases fell to an eight-month low last month. But, how significant was the weather in the drop in prices?
Nationwide have highlighted the bad conditions as a major reason. However, Martin Gahbauer, Nationwide’s chief economist, also points to the end of the stamp duty holiday as a major reason for falling prices. The halt in the upward trend will provide some relief to potential first-time buyers who are no longer benefiting from the stamp duty holiday and for whom affordability had begun to deteriorate again throughout 2009.
How long will the fall last?
Martin Gahbauer believes “At this stage, it is difficult to gauge how much of the drop in housing activity is attributable to one-off factors and therefore whether February’s fall in prices is just a temporary blip or the start of a new trend.” Gahbauer also points out that it was unlikely the market could have maintained the very strong momentum seen for most of 2009 as house prices were beginning to move ahead of the recovery in general economic conditions. The cheap pound, high foreign investment and low stock were driving prices unrealistically high. Despite the monthly price fall, the annual rate of house price growth increased to 9.2% in February from 8.6% in January. The average UK home now costs £161,320.