House prices fall by £30,000...with worse to come
HOUSE prices have fallen almost £30,000 in the past year and are set to drop even further, Britain’s biggest building society warned yesterday.
An average three-bedroom semi on the market for £186,000 a year ago would now cost £158,872, according to the Nationwide.
Experts warn that the decline is likely to continue next year as the credit crunch forces hard-up homeowners to sell.
This month’s 1.4 per cent drop in prices means the annual fall is 14.6 per cent – the biggest since the Nationwide began collecting monthly data in 1991 and the steepest since its house price index was launched in 1952.
The lender also warned that sellers who refuse to lower their asking prices are stalling the market.
Fionnuala Earley, chief economist at the Nationwide, said: “Consumers still expect prices to continue to fall into 2009 and will therefore be reluctant to trade without some discount on the asking price.
“This type of stalemate ultimately limits the number of transactions that can take place.
“While there will always be a rump of sellers who will need to move to accommodate job or family changes, there will be others who are affected by economic conditions more acutely.
“We should expect a moderation of price expectations on the part of sellers in a weaker economic environment.”
She warned that the grim figures offered a further sign that the UK was heading into recession, which would put even more pressure on prices.
Experts forecast that if house prices keep falling at the same pace, by next February they could be 25 per cent lower than their peak value in October 2007.
Ed Stansfield, property economist at Capital Economics, said: “Despite the fact that prices are falling at their fastest pace on record, the market remains fundamentally overvalued by almost any measure. So as the economic downturn gathers pace, we still think there is plenty of scope for the rate of house price deflation to accelerate.”
Philip Hammond, Shadow Chief Secretary to the Treasury, said: “These figures are yet more bad news for all those families who stretched themselves financially to buy their homes.
“It seems inevitable that more negative equity and repossessions are on the way.”
The Royal Institution of Chartered Surveyors said: “With the country teetering on the brink of recession, there seems little likelihood that house prices will recover in the short term as fears over job losses take centre stage.”
Recent figures from the Council of Mortgage Lenders show the number of homes sold as a proportion of mortgages in 2008 fell to its lowest level since 1974. And housing information business Hometrack said last month that homes were taking 60 per cent longer to sell than a year ago.
Hopes of aggressive interest rate cuts rose today after the US Federal Reserve’s half-point cut.
The Bank of England is expected to cut its interest rate next week by at least 0.5 per cent from the current 4.5 per cent.