UK house prices stagnate in September

British house prices stagnated for the second month running during September as both buyers and sellers sat on their hands, figures showed today.

The average cost of a home in England and Wales remained unchanged at £176,300 (€253,000) during the month, while the annual rate of growth fell back to 5%, down from a recent high of 6.8% in April, according to property group Hometrack.

But the group said despite falling levels of demand and declining sales volumes, a lack of 'saleable' homes coming on to the market was preventing prices from falling.

Instead it said the recent credit crisis had created a period of inertia in the property market, with buyers and sellers both delaying decisions until the outlook was clearer.

Overall prices fell in just four postcode areas across England and Wales during the month, while they rose in just under 9%, the lowest level since November 2005, and remained unchanged in the rest.

Richard Donnell, director of research at Hometrack, said: "Turmoil in the financial markets has created a period of inertia in the housing market with buyers and sellers unwilling to commit until the outlook becomes clearer.

"As a result, agents reported a 2.7% drop in the number of sales agreed over September, following a 1% fall in August."

He added that demand from potential buyers had also fallen by 4.5% during the month, meaning demand had dropped by around 11% since June.

He said: "This level of change in demand is not unusual around Christmas and the New Year but the last time there were three consecutive monthly falls in demand was in the second half of 2004.

"This was the last time that higher interest rates and weaker market confidence impacted on the housing market."

On a regional basis, house prices remained static in all areas of the UK during September, except for London and the South East, where they edged up by 0.1%.

The Hometrack figures add to growing evidence that the housing market is slowing down in response to higher interest rates and affordability constraints.

Last week the British Land Registry said prices rose by just 0.2% during August, although Nationwide Building Society said the market appeared to have shrugged off the turmoil in global credit markets with prices rising by a strong 0.7% during September.

Data on the housing market have presented a mixed picture in recent weeks, with some indexes suggesting a slowdown is now well under way, while others have pointed to house prices remaining relatively resilient to recent hikes in interest rates.

But the recent turbulence in global credit markets is expected to have a cooling effect on the market, leading to higher costs for some mortgages and making lenders become more risk-averse.