House prices fall in November

The three month on three month rate of change – a smoother measure of the recent price trend – rose from -1.5% to -1.3%. This remains well above the deeply negative rates of -5% to -6% that prevailed during the most severe phase of the downturn in 2008.

The annual rate of change – which compares house prices to their level 12 months ago – fell from 1.4% to 0.4% and suggests that house prices are essentially unchanged from a year earlier.

Martin Gahbauer, Nationwide's chief economist, said: “There is little evidence to suggest that house price declines are likely to accelerate in the months ahead.”

Much of the weakness in property values since the Spring has been driven by a return of sellers to the market, Nationwide said, following unusually low levels of property for sale in 2009 and early 2010.

Gahbauer added: “There is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest.

“In addition, there are early signs that the flow of new property onto the market may be slowing down again as potential sellers observe the recent weakness in prices and decide against marketing their properties at the current juncture.

“Similar seller behaviour was observed in late 2008 and early 2009, eventually leading to a decline in the amount of property on the market.”

Nationwide said although house prices have so far fallen by less than they did in the early 1990s, house purchase activity has fallen by more. Over the first 18 months of the current downturn, real (i.e. inflation-adjusted) house prices tracked the path of the early 1990s very closely.

Over the following 18 months, however, real house prices staged a small rebound, whereas in the early 1990s they continued falling broadly at the previous rate of decline. As things currently stand, real house prices are 19% below their 2007 peak, whereas at the equivalent stage of the early 1990s downturn, they were 31% below their peak.

Gahbauer said: “The most likely explanation for this is that while real interest rates remained very high throughout the 1990-1992 period, they have fallen dramatically into negative territory in the current down cycle, providing more support to mortgage holders.”

Research house, Capital Economics, said: “Looking ahead, the continued boon to home-owners from the favourable level of interest rates makes predicting the pace of further falls in house prices difficult.

“But with access to credit still very constrained, demand dropping away quickly, and selling conditions deteriorating noticeably, we expect the rate of decline of house prices to accelerate next year.”

And Catherine Penman, head of research, at property consultants Carter Jonas, added: “The stalling economic situation reinforced by the Comprehensive Spending Review, weak outlook for mortgage demand and public sector cutbacks collectively imply a further weakening of demand in residential property over the year to come.

“A regional divergence will become increasingly apparent moving forwards with the country house market. Whilst not immune to the national housing market slowdown, it is expected to be sheltered to an extent.

“Pricing will become increasingly sensitive as we move into the seasonally busy spring market and we anticipate London house prices to increase circa 5% during 2011.

“But with austerity measures and public sector cutbacks set to firmly take hold over the next year, UK house prices are expected to fall further in the short-term. Inevitably, isolated bubbles of activity will buck the trend although overall, we predict a fall in values of circa 3% in 2012.”