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Last Updated: Tuesday, 29 January 2008, 12:20 GMT
Property prices continue to fall
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Many commentators predict flat house price growth during 2008
House price inflation in England and Wales dropped sharply in December, according to the Land Registry.

Average prices fell by 0.4% in December, bringing the annual inflation rate down from 8.1% in November to 6.7% last month.

The December fall was the first decline recorded by the Land Registry since August 2005, although prices grew in three individual regions.

It said the latest data was "a clear indication of a weakening market".

The average house price was 184,469 in December compared with 186,009 in November.

'Downward trend'

Most regions showed monthly price falls, with the largest drop of 3.3% recorded in the East Midlands. Annual price inflation in the region now stands at 0.5%.

The largest monthly price growth was seen in the north-east of England, at 2.2%. Prices also grew by 1.1% in the East and by 0.6% in London.

The capital is still showing the highest annual price change at 14.3%, but the Land Registry said that was a result of very high price growth experienced at the end of 2006 and beginning of 2007, the effects of which would shortly drop out of the index.

The average price of a property in London was almost twice the average for England and Wales at 354,625.

The volume of transactions was also down on the same period last year, with an average of 103,374 per month in the months of July to October 2007, compared with 117,086 per month from July to October 2006.

"This month's data provides evidence of a downward trend in house prices," said the Land Registry.

"Although the annual growth rate remains positive, this month's fall is a clear indication of a weakening market," it added.

Decline

All the major house price indexes are documenting the continuing property slowdown.

Nationwide and Halifax house price data
Recent data from the Department of Communities and Local Government (DCLG) revealed that prices fell by 0.8% in November.

The latest research from the Halifax bank and the Nationwide building society showed the market continued to weaken in December, showing annual price growth of 5.2% and 4.8% respectively.

Mortgage approval levels are also at a three-year low.

Earlier this month the Council for Mortgage Lending said gross lending was 22.6bn in December, down 25% from November and the lowest monthly figure since May 2005.

It said the problems in the credit markets were still limiting lenders' ability to advance money.

Pressure

In common with many analysts, the CML has already predicted that house price inflation will be largely flat in 2008.

A smaller number of commentators have said they believe prices will actually fall.

The latest group to make such a prediction, the Centre for Economics and Business Research (CEBR), forecast that average property prices will drop by 2.5%, or 11,000, during 2008.

But the CEBR said it expected prices to recover during 2009, boosted by the likelihood of further interest rate cuts this year combined with supply shortages.

The Land Registry data is expected to lead to further calls on the Bank of England's Monetary Policy Committee (MPC) to cut rates at its meeting next week.

After voting unanimously to cut interest rates from 5.75% to 5.5% in December, the MPC decided to hold rates at its January meeting, but many economists believe a further rate cut is necessary.



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