House prices fall for third month in a row

The average house price in England and Wales fell by 0.2 percent in December compared to November, while the number of transactions dropped five percent – 33 percent down on December 2009. That’s according to the latest LSL Property Services house price index.

This monthly fall, the third in a row, brings the average house price to £222,827, down £9,000 or 3.9 percent from the February 2008 peak of £231,828.

Annual house price growth dropped to 2.9 percent in December from 5.1 percent in November 2010. LSL Property Services said the rate of growth will slow as the larger gains of last year drop out of the calculations.

It also highlights widening regional disparities, with traditionally high-value areas such as London and the south-east displaying stronger than the national average house price growth.

LSL put a positive slant on the figures, saying that despite average house prices falling, the steady rate of the decline indicated resilience in the market.

There are currently plenty of would-be buyers available to take on mortgage products where they are offered, and for those with a large amount of spare cash the current market still represents a good opportunity to invest in affordable property, it added.

Economy round up and "double-dip" escape

The British economy will escape a ‘double dip’ this year, but households face a tight squeeze on living standards from higher-than-expected inflation, rising interest rates and tax rises, according to forecasts from a leading employers' organisation.

With VAT rising to 20 percent yesterday and consumer confidence hitting record lows, a sluggish property market and a drop in average house prices of 4 percent in 2011 completes the gloomy economic outlook.

The Confederation of British Industry (CBI) says the Bank of England needs to raise interest rates further and faster than previously thought, because of the impact of rising world commodity prices on inflation.

The bank rate, which currently stands at 0.5 percent, is seen at 0.75 percent by the spring of this year and is envisaged to rise steadily to 1.25 percent this time next year.

However, even at such levels, rates would be low by historical standards.

The pace of recovery in the UK economy has been slightly stronger over the past year than expected and faster than typical during the first year out of a recession, but that rapid pace of growth is not expected to continue over the next two years of recovery, CBI said.