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Urgent Stock Market Message

UK House Prices False Signs of a Bottom on Government Data

Housing-Market / UK Housing May 12, 2009 - 11:05 PM GMT

By: Nadeem_Walayat


The latest UK Government House Prices index data (Communities and Local Government) showed a continuing downtrend with the annual pace of decline accelerating in March to -13.6% from Februarys -12.3%. However the quarterly change showed a significant improvement with a -3.8% drop for Q1 2009, against the housing market crash the occurred in Q4 2008 of -6.4% (-25.6% annualised), which is falsely being jumped upon by some as signs of a housing market approaching bottom.

Summary of Government House Price Index data for March 2009:

• UK house prices were 13.6 per cent lower than in March 2008.
• The mix-adjusted average house price in the UK stood at £187,193 in March 2009 (not seasonally adjusted).
• UK house prices fell by 3.8 per cent in the quarter ending March 2009. This compares with a fall of 6.4 per cent for the quarter ending December 2008.
• Annual average house prices fell in England (-13.8 per cent), Wales (-13.0 per cent), Scotland (-9.8 per cent) and Northern Ireland (-16.1 per cent).
• Annual average house prices paid by first time buyers in March 2009 were 16.7 per cent lower than a year ago. By comparison average house prices paid by former owner occupiers were 12.4 per cent lower.

My recent updated in-depth analysis concluded that those looking for an near term bottom in the UK housing market are going to be greatly disappointed with little to suggest that the overall trend of house prices is going to stabilise at these lower levels let alone start to rise. All home owners can expect is a few months of stability following which the bear market is set to continue albeit at a more measured rate as the market remains firmly in the grip of the panic stage as originally elaborated upon in the analysis of December 2008.

The UK housing bear market trend is expected to moderate for 2009 from the forecast -16% towards -10%, however the downtrend is expected to continue for many more years at a shallower pace as the housing market depression will have the effect of slowly sapping the will of home owners who continue to mistakenly hold on to hope of a return of the housing boom to sell into that will FAIL to materialise as the house prices eventually drift towards the forecast for a peak to trough contraction of approx 38%.

By Nadeem Walayat

Copyright © 2005-09 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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