House prices ‘fall 10.5% in year’

Posted by admin on 29 August, 2008 under Business news | Be the First to Comment

UK house prices have seen an annual double-digit fall for the first time since 1990, according to the latest survey from the Nationwide.

Prices were 10.5% lower in August than they were a year ago. Prices fell by 1.9% compared with July.

The average home now costs £164,654, which is more than £19,000 cheaper than the average price one year ago.

Gloomy forecasts from house builders mean the market is likely to remain subdued, Nationwide says.

The Nationwide survey found that house prices have fallen for 10 months in a row and are at their lowest level since early 2006.

Fixed-rate favour

Data from estate agents suggested “there may be some glimmers of interest returning to the market” as some buyers were taking the opportunity to secure large discounts, said Nationwide’s chief economist Fionnuala Earley.

“The extent to which [an interest rate fall] will revive the mortgage and housing market is likely to be limited while overall confidence in economic and housing market conditions is low” Fionnuala Earley, Nationwide

Gloom over house price figures

But she said that an increased supply of properties on agents’ books would continue to act as a dampener to house price growth in the short term.

House builders were pointing to a loss of consumer confidence for the continued slowdown, the report said.

And Ms Earley added that the lack of availability of mortgages was still pushing down house purchase activity.

“There is clearly less mortgage borrowing taking place in the current market, but those borrowers choosing a new loan are tending to opt for fixed rate loans, even though they have been more expensive than trackers,” Ms Earley said.

First-time buyers

Earlier this month, figures from the Council of Mortgage Lenders (CML) suggested that the slump in mortgage lending continued in July.

Total lending stood at £24.8bn, up by 5% from June, but still 27% lower than a year ago.

First-time buyers, who would normally benefit from falling prices, have struggled to obtain cheap mortgage deals without a large deposit.

However, the cost of fixed-rate mortgages has been falling in recent weeks with a series of lenders cutting their interest rates.

Ms Earley said the “gloomier feel” of the economy in general, as well as rising food and fuel prices and a lack of confidence with jobs made people more prudent with their borrowing.

She said that prices, that were still higher than five years ago, were likely to keep falling this year as there remained a lot of uncertainty in the market.

She added that the situation would not turn around very rapidly unless there was a significant change in consumer sentiment.

Rate cuts

The door was open for interest rate cuts by the Bank of England, she added, but this in itself would not turn things around.

“We expect the next move in the bank rate to be down, but the extent to which this will revive the mortgage and housing market is likely to be limited while overall confidence in economic and housing market conditions is low,” she said.

The picture is not completely the same across the UK. Although the Nationwide figures take an average from across the country, Ms Earley said the Scottish market was proving more resilient than most areas.

Northern Ireland, in contrast, was experiencing higher than average falls.

Henry Pryor, who runs property website primemove.com, said that markets were affected by local factors.

News reported by The BBC