According to figures released by the Halifax house prices fell by 1.3% in December, which is much higher than the predicted price falls of 0.4% which was widely held by economists as the maximum rate of fall for the month.
The annualised 3.4% fall for 2010 from December 2009 to December 2010 is proof that the housing market is far from stable with mortgage approvals way below what is considered to be a sustainable indexed housing market.
Houses fell on average by £2,000 bringing the average house price down to £163,435 but there is a problem with such a broad sweeping statement about house price falls.
The Halifax figures conflict with the Nationwide statistics for the same month, which showed a slight rise for the month. But we cannot rely on either as aÂ yardstick when there is so much variance in mortgage approvals nationally.
We are actually viewing the housing market through very rosy glasses because both the Halifax and Nationwide include the south of England and in particular London where the housing market has comparatively recovered and accounts for most of the wealth held in the property market i.e. The Kensington and Chelsea borough in London (£63 billion) is worth more than all of Bristol (£50billion) yet has half the population of Bristol.
To get a clearer picture of house price falls we need to see a regional breakdown of the Halifax and Nationwide, which can then exclude the South which distorts the true house price trend nationally.
Why should we exclude the South ? I hear you cry.
Given that the South is the one area of Britain that has its prime focus of industry serving London (not just city workers who account for a small portion of workers in London but business men, high end service industry employees and entrepreneurs). It is no wonder house prices have regained lost ground through its extended commuter belt which has sustained a protracted period of growth thanks to the so far comparatively impervious south east economic conditions.
The lower percentage of public sector workers in the south east compared to say the north of England or Wales is another key factor in the currently buoyant south eastern property market, which will not be affected as much by austerity measures so the inclusion of the disproportionate value of property in the south to the rest of the country in any house price statistics is going to discredit any national indexing.
Back to the reason for this headline.
I will leave this article with a simple question. If the economically robust south east's huge influence on housing statistics is giving a reading of a 3.4% annual fall in prices then what is the real picture like for the rest of the country?
House prices will continue crashing and probably faster than indexing tells us, but you will not notice this whilst we have such regional variances unreported in mortgage approval statistics.
We will probably be looking at a fall of between 15% and 20% this year with the bulk of the falls in the latter part of the year.
But that will be the official figures which include the south east misrepresenting the national figure (as well as ignoring the effect of inflation on the true value of the pound).
i.e. the impact of a 5% fall in a house in Bristol is going to be unnoticed in the overall statistics when a modest increase in the value of a property in Kensington and Chelsea alone will offset it.