House prices fell back in July

House prices fell in July for the first time since February, according to the Nationwide House Price Index. The price of a typical UK property fell by a seasonally adjusted 0.5% month-on-month, after having been unchanged in June.

Commenting on the figures Martin Gahbauer, Nationwide's Chief Economist, said: "The 3 month on 3 month rate of change - a smoother indicator of the near term price trend - fell from 1.7% in June to 1.3% in July, significantly below the peak of 4.0% reached in September 2009. There was also a sizeable drop in the annual rate of house price inflation from 8.7% in June to 6.6% in July, due in part to the strength of house price gains in the same month last year.

Demand from homebuyers remains subdued

"So far in 2010, demand from homebuyers has made little progress in building upon the recovery seen during much of 2009. Despite the introduction of a second stamp duty holiday for the vast majority of first time buyers and record low interest rates, the number of properties changing hands across the UK is still running at only half the levels seen prior to the financial crisis and recession.

"A combination of restrictive credit conditions and uncertainty about the future economic outlook continues to limit the pool of buyers to those with relatively large financial resources. Many potential buyers still lack the confidence to purchase their first home or trade up when faced with uncertainty over future income and employment prospects.

"More encouragingly, last week's GDP figures showed that the UK economy recovered at a faster than expected pace in the second quarter. The 1.1% quarter-on-quarter growth rate seen in April-June was the strongest since early 2006. For the moment, however, concerns about the medium-term impact of fiscal austerity on personal finances is more than outweighing any potential optimism about the recovery's short-term cyclical momentum.”