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Last Updated: Thursday, 31 March, 2005, 08:54 GMT 09:54 UK
House price dip 'worst in decade'
UK house prices have experienced their biggest monthly fall in almost 10 years, the Nationwide has said.

Prices fell 0.6% during March - the biggest drop since June 1995.

This meant house prices were 7.9% higher in March than a year previously - the first time the annual growth rate has fallen below 10% since 2001.

The building society said that, despite the drop, the figures confirmed its view that the market was "experiencing a soft landing" not a crash.

It forecast mortgage approvals would "bounce back" to about 84,000 a month, indicating a pick-up in activity, after slipping to 79,000 in January from 82,000 in December.

Nationwide added the fall had followed two months of rises, consistent with its forecasts that 2005 price movements would be "characterised by rises in some months and falls in others".

We still expect prices to be 5% lower in the last quarter of 2005 compared to 2004
Ed Stansfield, Capital Economics

The figures did not prompt it to revise its forecasts of price growth of 0%-5% during 2005.

But seasonal adjustments hid the fact that prices grew by almost 1,000 during March, the Nationwide added, taking the UK average price up to 153,876.

'Bottoming out'

Despite the dip in price growth, the Nationwide's forecast of a "soft landing" for the market is in line with other recent surveys that have suggested the market is not heading for a crash.

On Monday, property website Hometrack said price falls were luring more buyers onto the market, with the number of people on estate agents' books rising 6.2% in March.

On Tuesday, the British Bankers' Association (BBA) said the amount of home loan approvals rose by almost 14,000 in February, indicating "the declining trend seen during 2004 may be bottoming out".

House hunters looking at house
More buyers are entering the market
However, analysts Capital Economics said they still expected a "consistent and persistent fall" in prices.

"We still expect prices to be 5% lower in the last quarter of 2005 compared to 2004," said Ed Stansfield of Capital Economics.

Nationwide's figures, which follow a raft of reports suggesting recent rate rises are taking their toll on consumers, are likely to raise speculation that the Bank of England can hold off on raising interest rates.

"There seems to be a little more breathing space on the timing of any change in UK interest rates," said Nationwide economist Alex Bannister.

"Evidence of a continuing gentle slowdown in the housing market, as shown by the latest data, is likely to reinforce this view."

He added that homebuyers, and owners, were becoming "increasingly realistic" about the potential for further price growth.

'Affordability the key'

At a regional level, there continues to be a North-South divide with prices growing most quickly in the north of England, and in Wales, Scotland and Northern Ireland, Mr Bannister said. London recorded the slowest rise.

However, he added that price growth had slowed "rapidly" in the north-west of England, once one of the UK's hotspots, and the region appears to be following the trend seen in London a year earlier.

"Affordability seems to be key to this," he added.

"Mortgage payments as a proportion of take-home pay has been increasing across all of the regions over time, but hit higher levels in London... much earlier and this is when prices began to slow."


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