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F T H P I August

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Dr Peter Williams, Chairman of Acadametrics, comments,

"The average price of a home in England & Wales is now £202,181. At this level, it is down £29,633 from its peak in February 2008 of £231,814. The nadir of the recent downturn in house prices occurred in April 2009, when the average price had fallen to £199,760, a peak to trough fall of 13.8%.

"Whilst some commentators believe that prices have further to fall, the increase in prices over the last four months tentatively suggests that the market has bottomed out and that we are slowly climbing out of the trough. Indeed, the evidence from the FTHPI is that the monthly falls seen over the period March 2008 to April 2009 have not been maintained and the rate at which annual prices have been declining has slowed on a month by month basis, such that the change in the annual rate was positive 1.6% in August 2009, compared with a negative 2.2% in August 2008.

"Our peak to trough fall of 13.8% is less than that shown by the lender indices but is closely similar to the CLG index which, whilst based upon fewer transactions than FTHPI which employs every sale recorded the Land Registry, uses the largest available sample of mortgage prices. Clearly, such a figure masks larger falls in sectors such as new build and smaller falls, or even gains, in very specific locations.

"Whilst indications are that the market is ‘bottoming out’, the price gains achieved in completed transactions, as reflected in FTHPI, are very small and the potential for further reductions remains, not least because of the continuing under-supply of mortgages. Going forward, this could comprise a serious continuing downward pressure on the market. Furthermore, whilst there is a degree of optimism in the air regarding the economy and the housing market at present, we know that unemployment will continue to rise and that the public expenditure which has helped underpin the market will be more limited going forward. Low interest rates have been key to the recovery in terms of helping existing owners and supporting new buyers. Governments around the world recognise the importance of this along with their own support to the market through a variety of ‘stimulus’ packages. The Bank of England’s additional £50 billion of funding for the asset purchase scheme was important here in terms of supporting continued recovery of the capital markets. There is now a clear understanding that the removal of government support packages has to be handled very carefully along with the repayments banks must make. Given that interest rates will almost certainly rise in late 2010, it is clear that we are some distance from what might be seen as a stable and sustainable recovery. In that regard, the progress we report in the England and Wales housing markets has to be viewed with continuing caution."

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