House prices down a further 0.9%

Housing estateHouse prices continued to fall in October, figures have revealed, ramping up pressure on Chancellor George Osborne to announce measures to inject life into the market in his autumn statement.

Prices dropped 0.9% compared to the previous month, bringing the average value of properties sold in England and Wales down to £159,999, according to the Land Registry.
The latest falls come on top of a 0.6% drop in September and leave house prices 3.2%, or £6,569, lower than they were a year previously as the squeeze in consumer spending power, the weak job market and the eurozone debt crisis hits confidence.

The Chancellor is set to announce a mortgage indemnity scheme aimed at helping up to 100,000 buyers of new homes with only a 5% deposit.

This would reduce the risk to lenders if borrowers failed to make repayments, allowing them to offer mortgages to those with small deposits.

But Howard Archer, chief economist at IHS Global Insight, said it "is too small a measure to provide significant support to house prices".

He expects house prices to drop 5% from current levels by mid-2012 and said: "We suspect that consumers' squeezed purchasing power, a markedly weakening labour market and major concerns over the economic outlook will limit potential buyers and weigh down on house prices.

"On top of that, there still seem to be significant difficulties in getting a mortgage for many people, notably including the need to raise high deposits, particularly for first time buyers."

Wales suffered the biggest monthly tumble in prices, down 3% on September, while the North East saw the biggest annual declines, down 7.2%.

Only London saw prices higher than a year ago, up 0.3% to £340,308. Commentators believe the capital's ability to attract overseas buyers as a world city has helped to keep the London market buoyant.
© 2011 Press Association
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