UK Home Prices Held Down by Eurozone Crisis

By Allison Halliday | February 23, 2012

An article in World Property Channel shows that UK house prices are likely to remain suppressed due to continuing worries over the Eurozone crisis, and growing concerns over the risk of a double-dip recession.

UK home prices are headed underwater along with the rest of the Eurozone © andreacrisante - Fotolia.com

It is based on the findings of Chesterton Humberts/CEBR December 2011 House Price Poll of Polls report. This report is unique in that it incorporates all of the major national house price indicators and quantifies the results according to historical accuracy.

House prices have fallen by 0.6% in the year ending January, with the exception being London and the south-east. Mortgage approval levels reached 52,939 in December which is 24.5% more than December 2010, but is still 50% less than levels reached during 2007. The average cost of a house in the UK is now £175,020 which is 1.5% less than the average cost of a house throughout 2010, showing prices remained virtually flat throughout last year. The fact that house prices are slightly lower than in December 2010 is perhaps a little unexpected, as the weather in December 2010 was particularly harsh and had a significant effect on economic activity. In contrast last December was relatively mild, but concerns over the Eurozone crisis did reach a peak.

In previous recessions many property sales have been driven by debt, but this time is slightly different due to low interest rates. However a lot of sales are still due to the traditional reasons of death, divorce or downsizing. In contrast with most of the UK, house prices in London rose by 3.9% annually in January, and by a negligible 0.2% in the South-East.

There are already concerns that the UK may have slipped back into recession as business confidence numbers for the first quarter of this year show sentiment is negative, implying a further fall in house prices may be likely in the near future. This could be tempered by quantitative easing from the Bank of England which may come into effect as early as spring.