What now for UK house prices?

Reports that UK house prices on average fell by £6,000 in September 2010 were a bitter blow for the sector and have obviously injected some concern into the consumer market. However, is this the beginning of a sustained collapse in the UK housing market or nothing more than a temporary blip?

While a fall of £6000 in one month, bringing the average UK property value to just over £160,000, is obviously of concern, we must also understand that the three-month reduction in UK property prices stands at just 0.9%. This compares to a figure of 5% in the depths of the UK economic downturn post the credit crunch and illustrates that we are nowhere near the same situation that we were back in 2008/9.

However, we must also be wary of further pressure on the UK housing market and the government and Bank of England will be watching this particular area of the UK economy like a hawk. As property prices fall further this will reduce the ability for many to remortgage as their equity content within their home also falls. If this were to happen it would effectively stall the UK property market and have far-reaching consequences for the overall UK economy.