U.K. house prices declined for the second consecutive month in April as housing market activity softened after the expiry of stamp duty holiday, data published by the Nationwide Building Society revealed Thursday.
The price of a typical house fell by 0.2 percent month-on-month, in contrast to expectations for a 0.5 percent rise. However, the rate of decline slowed from March's 1 percent.
On a yearly basis, house prices were down 0.9 percent in April, matching the size of decline seen in March. The decrease was bigger than the expected 0.3 percent drop.
The stamp duty exemption provided a temporary boost to house prices in early 2012 as buyers brought forward their purchases to avail duty holiday. Going forward, measures such as the government's NewBuy scheme should provide some support to buyer demand, Nationwide Chief Economist Robert Gardner said.
"However, the challenging economic backdrop suggests that a significant acceleration in prices or activity is unlikely in the near term," said Gardner.
IHS Global Insight Chief UK Economist Howard Archer says house prices are set to drift downwards over the months ahead in the face of soft economic fundamentals and low consumer confidence. He expects house prices to fall by around 3 percent by the end of 2012.
Nationwide expects the economy to gather pace gradually in the second half of the year. The mortgage lender said monetary policy remains supportive and a gradual decline in inflation should provide some support for real household spending in the quarters ahead.
As it will take time to penetrate positive impact into labor market and households, housing market activity is likely to remain subdued, with house prices showing little growth or moving modestly lower over the next twelve months, the agency said.
Policymakers of the Bank of England will meet on May 9 and 10 to decide on interest rates and asset purchases. The unexpected double-dip recession in the first quarter has raised possibilities of additional bond purchases.
Even if the Monetary Policy Committee does decide to increase the size of the asset purchase scheme, it is unclear how much of a boost this will provide to the wider economy, or the housing market, since long-term interest rates are already close to their all time lows, Gardner said.
Source: RTT News