UK House Prices Continue to Fall, Sales Harder to Make, Equity Withdrawals Turn Negative

The results of the December Hometrack Survey of real estate agents in England and Wales regarding the prices at which houses are being sold and the ease or difficulty in making sales was released today. The year to year decline in house prices that started in April, 2008 has continued and intensified. In December the weighted overall average price of a house was 159,900 pounds, a price this low was last seen in July and August of 2003, as can be seen in the first chart.

The sales price of a house in December was 88.6% of the asking price, the lowest ratio recorded since the survey began in January 2001. Similarly the time it took to complete a sale was 12 weeks, the longest time recorded in the survey. The ratio of selling to asking price and the number of weeks to complete a sale are shown in the second chart.

Also released today were data on equity withdrawals during the third quarter of this year. For the second quarter in a row, equity withdrawals were negative. In order to see what this means it is useful to see how the series is derived. According to the Bank of England, equity withdrawals are equal to that part of secured borrowing that is not invested in the housing market. The series is measured by the sum of household's net lending secured on dwellings and capital grants for households paid to persons and household associations less the sum of expenditures on the construction of dwellings and net transfers of land to the household sector. Data are available only for the net lending and expenditures on dwellings, but these are by far the most important factors in equity withdrawals. As can be seen in the third chart, the difference between lending and construction is a close approximation of equity withdrawals.