House prices end 2009 just 0.8% down

House prices are just 0.8% lower than a year ago, with an average national asking price of £217,710, according to the December FindaProperty.com House Prices and Affordability Index. This is despite two months of falling prices, as the market enters its end-of-year seasonal slowdown.

First-time buyer property prices are 4.3% down on last December, having fallen quite sharply in the first quarter of 2009. Since March, however, they have held fairly steady, at or around £154k.

As a result, affordability at the lower end of the market remains better than at any time in 2008. The affordability gap, the deposit buyers need to raise after securing a typical mortgage, also reduced to £57,330 this month, 18.5% lower than the peak of £70,307 in December 2008.

The end-of-year lull is more marked among home movers than at the lower end of the market, with home mover properties down 2.2%, or more than £6,200, over the past two months, compared with a much smaller 0.3%, or £480, fall for first-time buyer homes. Indeed, the pick-up of the housing market in mid to late 2009 was largely driven by existing homeowners with substantial equity in their properties who took the opportunity to buy as prices dipped - and the shortage of available stock on the market fed through into rising property values. The withdrawal of these ‘discretionary’ home movers from the market was largely responsible for the decline in prices in November and December.

Nigel Lewis, FindaProperty.com’s Property Expert, commented: “Ending 2009 with house prices marginally down is a better result than many people were fearing - the house price crash that never happened. There were seven months of price rises between March and October, led by renewed activity among homeowners with equity in their existing homes who were still able to borrow and saw the market slowdown as an opportunity to move. Some first-time buyers also returned to the market but they continue to find it difficult to raise finance - despite the fact that home purchase is and remains significantly more affordable than it was in 2008.

“Following two months of falls, prices could drift down further over the winter period, which may well provide a renewed impetus to housing market activity in the New Year, as buyers take advantage of attractive prices and less competition in the market. Lenders need to play their part in making funds available at affordable rates to both home movers who need relatively low loans-to-value, and also to first -time buyers who are, after all, the lifeblood of the market.”