House prices decline by 0.4% in August

August 2012

- Annual change: -0.9%

- Quarterly change: -0.3%

- Monthly change: -0.4%

- Average Price: £160,256

Key facts

- House prices in the three months to August were 0.3% lower than in the preceding three months. This was slightly worse than in July when there was a 0.1% decline in prices on a three monthly basis.
  
-  House prices declined by 0.4% in August. This was the second successive monthly fall, with these two decreases largely cancelling out the rises recorded in May and June.

- Little overall change in prices over the first eight months of 2012. The average UK house price in August 2012 was 0.2% higher than in December 2011. House prices nationally are at a very similar level to three years' ago, at £160,256.

- Prices in the three months to August were 0.9% lower than in the same period a year earlier. This measure of the annual rate has been between 0% and -1% throughout the last six months. The annual rate has improved compared with a year ago when prices were falling by 2.6%.

- Recovery in mortgage approvals. The industry-wide number of mortgages approved to finance house purchase - a leading indicator of completed house sales – picked up in July with a 7% increase following a 13% decline the month before. Overall, approvals in the three months to July were marginally lower (-2%) than in the same three months last year. (Source: Bank of England, seasonally-adjusted figures)

- Resilient employment has probably helped support housing demand. The number of people in employment increased by 201,000 in the second quarter of 2012, the largest quarterly increase since the three months to July 2010. Even though inflation has been falling in recent months – notwithstanding the slight pick-up in July - weak income growth has prevented that from leading to a significant improvement in consumers' spending power. However, if inflation falls further over the next year, as we expect, spending power should be on a gradual upward trend. This is likely to support housing demand and, therefore, house prices.

Commenting, Martin Ellis, housing economist, said:

"Nationally, house prices continue to tread water, as measured by the underlying trend. Prices in the three months to August were fractionally lower (-0.3%) compared with the previous three months. House prices fell by 0.4% in August with the declines in the past two months largely offsetting the gains in the preceding two months.

"Overall, there has been little change in house prices so far this year with the UK average price in August at a very similar level to the end of 2011. A gradual upward trend in spending power, aided by lower inflation, should help to support housing demand in the coming months. Nonetheless, house prices are likely to remain flat over the remainder of 2012 and into next year."