Average prices in Q2 were down year-on-year in all regions except London, by about 1.1%. Demand remains subdued, but so does supply according to the index.
Commenting on the figures, Robert Gardner,Nationwide's chief economist, said: “Stability remained the theme in June, with house prices flat over the month. This left house prices 1.1% below the level prevailing in June 2010.
“At 0.3%, the three month on three month measure of house prices was slightly weaker than the 0.6% pace of increase recorded in May.
“The property market has moved sideways over the past six months, and June’s data suggest that trend is being maintained through the summer months.
“Housing market demand has remained subdued of late, as evidenced by the still weak level of mortgage applications in recent months and the sluggish pace of new buyer enquiries reported by surveyors.
“There have been a few encouraging developments for households, but to date this hasn’t been enough to reinvigorate the housing market. Employment has been edging up and consumer confidence surged in May – although the latter may have had more to do with unusually warm weather and extra bank holidays, rather than signalling the arrival of any recovery-related feel good factor.
“Ultimately, these positives have not been enough to make up for the ongoing squeeze on households. With debt levels still high, the need to repair household finances is undiminished. However, sluggish economic growth, and wages rising at less than half the rate of inflation, means that consumers are struggling to make progress in repairing their finances.
“Developments on the supply side of the housing market are also failing to drive the market one way or the other. The low rate of building in recent years has limited the flow of new properties available for sale, while low interest rates are helping to support mortgage affordability and reduce the number of distressed sales. This has meant that the market has not become over supplied, despite the weak state of buyer demand.
“It’s hard to make the case for prices rising or falling sharply over the remainder of 2011 if the economy develops as we expect. Economic growth looks set to gather pace in the months ahead, but is likely to remain unspectacular. This in turn points to only modest gains in employment and sluggish wage increases, which will continue to keep many potential buyers on the sidelines.
“At the same time, the chances of a near term increase in interest rates appear to have diminished. Ultra-low interest rates should continue to support affordability for some time yet and keep a lid on forced sales. Overall, a combination of low transaction volumes, still tight housing supply and flattish house prices looks set to stay for the remainder of the year.”
