Where are Britain’s house prices heading now?

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The article below comes courtesy of the UK’s MoneyWeek.

It’s the question on everyone’s lips. To find the answer, we’ve hunted down what we believe are the best leading indicators for Britain’s housing market. And for now, they suggest that prices are heading for a fall.

We watch five indicators, all of which have proved useful guides in the past. These include the RICS Housing Market Survey and data on both mortgage lending and mortgage approvals. We also watch the price of shares in flooring specialist Carpetright. Consumer confidence is another useful data point we keep an eye on.

You can read in detail what each indicator suggests for UK house prices using the links below. But, to summarise, surveyors remain gloomy, according to the RICS Housing Market Survey, a bad sign for prices. Both mortgage lending and mortgage approvals remain very weak, which also points to falling prices. And shares in specialist flooring retailer Carpetright are also falling, which suggests poor housing market activity. Meanwhile, consumer confidence has dipped again, which also points to a further slide in prices.

1. What surveyors are saying about UK house prices

2. What Bank of England net mortgage lending says about house prices

3. What Bank of England mortgage approvals suggest about house prices

4. What Carpetright’s share price says about the housing market

5. What consumer confidence means for house prices

And here’s what house prices are currently doing, according to the latest indices:

Source: Bloomberg

Stop press: Just in from Nationwide

Each month the Nationwide Consumer Confidence index gauges the UK population’s view about the country’s current and future position. It also measures how bullish Britain’s consumers are about their own finances. The Expectations index monitors consumers’ views of the economic and employment situation in six months time.

What’s the latest?

November’s overall Nationwide consumer confidence survey has just hit a 20-month low. Britons are fretting about the likely impact on jobs, and disposable incomes, of the government’s spending cutbacks. The Expectations index was driven down too.

What does this mean for UK house prices?

Source: Bloomberg

The Nationwide Expectations index has led annual changes in Nationwide’s UK “all houses” price index by about three months. This latest survey points to a sharp year-on-year fall in Britain’s house prices.

Source: MoneyWeek, December 17, 2010.

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