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UK house prices decline 0.6 per cent in June

Stunted by the challenging economic backdrop, the average price falls on the month to £165,738.

The seasonally adjusted UK house price index was 325.4 points in June – a fall of 0.6 per cent compared to May, according to figures released by Nationwide. This represents a year-on-year decline of 1.5 per cent and is the lowest reading since August 2009.

The average UK house price (seasonally unadjusted) was £165,738 (May: £166,022).

Robert Gardner, chief economist at Nationwide, said:

The slightly weaker trend we’ve observed since March is unsurprising, given the difficult economic backdrop, with the UK economy dipping back into recession at the start of the year and few signs of a near-term rebound.

Part of the weakness in house prices may also relate to the ending of the stamp-duty holiday in March, which provided a temporary boost in early 2012, as buyers brought forward purchases that would otherwise have taken place later in the year.

The outlook for house prices remains highly uncertain. Economic conditions are expected to remain challenging over the next 12 months. However, policymakers’ efforts to bolster the supply of credit to the economy and to help lower the cost should provide support to demand. Moreover, the supply side of the market is still constrained, with construction failing to keep pace with the number of new households being formed. Overall, this suggests a continuation of the pattern experienced over the past two years, with prices remaining fairly stable over the next 12 months.

During the second quarter of 2012, the average UK house price reached £164,955. Nine out of 13 UK regions saw annual price falls, with the largest drop in Northern Ireland (-10.6 per cent year on year). Scotland was the worst-performing area on a quarterly basis, with prices falling 2 per cent during the second quarter. 

Gardner added:

Average house prices in the UK fell by 1 per cent in the second quarter of the year, after allowing for usual seasonal effects. Prices were down 1.1 per cent compared with the same quarter in 2011.

London saw the strongest quarterly growth rate, with prices up 1 per cent quarter on quarter. Whilst the annual rate of growth moderated a little from 2.3 per cent to 1.2 per cent, average prices in the capital have now virtually recovered to their 2007 peak.