House prices fall by £30,000...with worse to come

Daily Express - - NEWS - By Sarah O’Grady Prop­erty Cor­re­spon­dent

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.

Grim

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.

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