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Houses prices up for third month in a row

publication date: Jul 31, 2009
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Nationwide’s monthly report shows that house prices rose by 1.3% in July.

Commenting on the figures Martin Gahbauer, Nationwide's Chief Economist, said:
“The price of a typical house rose for the third consecutive month in July, increasing by 1.3% on a seasonally adjusted basis. The 3 month on 3 month rate of change – generally a smoother indicator of the near term trend – rose from 1.0% in June to 2.6% in July, the highest level since February 2007. House prices are still 6.2% lower than 12 months ago, but this represents another sharp improvement from the 9.3% year-on-year decline in June.
Even if prices were to remain unchanged for the rest of 2009, the year-on-year rate would continue to improve since prices were falling very sharply in the second half of last year. For the first seven months of 2009 as a whole, prices have risen by a cumulative 1.3%, suggesting there is now a reasonable chance that prices could end the year slightly higher than where they started. Only a few months ago, such an outcome would have appeared unthinkable.

“The improvement in housing market conditions, however, does not mean that the positive price trends of recent months can be extrapolated into the future in a straight line. If prices continue to increase at the rate of the last three months, they would soon rise to levels that would be noticeably out of line with earnings, rents and other
fundamental determinants of housing valuations. One should also not underestimate the impact over time of high unemployment, which has implications both for buyer confidence and the financial pressure on existing owners to sell. It is unlikely, therefore, that price increases can be sustained for long at the very strong rate observed over the last few months.

“One of the factors helping prices to stabilise in 2009 is the shortage of properties available for sale. In the short run, the supply of homes on the market is mainly determined by factors such as potential sellers’ confidence in market conditions, labour market turnover or financial pressures to sell among existing homeowners. Over the long run, however, the supply-demand balance depends critically on the rate of housing construction in relation to the rate of household formation.”