House prices down - but cheer up

Nationwide says house prices have fallen for the fourth consecutive month - but we shouldn't be too gloomy.

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Last Updated: 31 Aug 2010

House prices fell by 0.5% in February, Nationwide said today – the first time this decade that prices have dropped for fourth months in a row. The average British house now costs £179,358 – just 2.7% more than this time last year (down from 4.2% higher last month).

But before we all start banging our heads against the wall in despair, Nationwide had some slightly more cheerful news too. The lender thinks the outlook for the UK is one of ‘slower economic growth rather than recession’, siding with the view of Bank of England MPC member Andrew Sentance that ‘an outright recession…is a remote risk for the UK economy’. This is good news for the housing market, it reckons: ‘If the Bank of England’s central projection that the economy continues to grow is correct, conditions for the UK housing market are perhaps less gloomy than some would have us believe’. In other words: don’t panic just yet.

Of course, that’s easier said than done when every day seems to bring news of another credit crunch victim. Today it emerged that hedge fund Peloton Partners has been lagging well behind the leaders – it’s being forced to liquidate a $2bn fund because of sub-prime losses. Yesterday Rentokil issued its second profit warning in a matter of months, prompting calls for a break-up. And consumer confidence is at its lowest ebb for a decade, while retail sales also appear to be drying up (according to the cheery lot at the CBI).

On the other hand, mortgage approvals actually went up in January, much to everyone’s surprise. The banks that reported their results this week don’t seem to have suffered quite as much as some thought they might (so far, at least). And some companies seem to be trundling along nicely – like Rightmove, for instance, which is actually profiting from the fact that houses are taking longer to sell than they did last year…

So although Prince Harry’s probably a bit miffed this morning about being hauled back from fighting Terry Taliban in Afghanistan, the country hasn’t quite gone to hell in handcart while he’s been away...

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