Record drop in UK house prices
British house prices dived at a record rate during the year to the end of September, losing 12.4% of their value, figures showed today.
Nationwide Building Society said the annual drop was the biggest ever recorded by its index.
Prices slid by a further 1.7% during September, the 11th consecutive month of falls, to leave the average property in the UK costing £161,797 (€205,000).
The steepest price falls have been recorded in Northern Ireland, where the average cost of a home was 29.8% lower during the third quarter of the year compared with the same period of 2007.
Properties in the region have lost 10.8% of their value during the three months to the end of September alone.
Despite the sharp annual fall, Nationwide said there was evidence that the rate of decline was stabilising.
Fionnuala Earley, Nationwide’s chief economist, said: “House prices have now fallen for 11 consecutive months, but the monthly rate of fall has been almost unchanged in the last three months.
“The less volatile three-month-on-three-month series has also barely changed for the last three months, after accelerating in the first half of the year. This may suggest the beginning of some stabilisation in the pace of house price falls.”
The housing market has been hit by the combination of stretched affordability and the mortgage drought due to the credit crunch.
In September last year, before the full force of the credit crunch struck, annual house price growth was running at 9%, mortgage approvals for house purchase were in line with their long-term average and 40% of first-time buyers were borrowing more than 90% of their home’s value.
But Ms Earley said consumers’ confidence in the market changed almost immediately following the problems at Northern Rock.
She said: “As expectations have collapsed, house purchase approvals have fallen to less than a third of their long run trend.
“It seems that we would need to see a significant shift in consumers’ sentiment before we begin to see any real recovery in activity and subsequently house prices.”
She added that while sentiment was important, a resolution to the current financial turmoil was also key.
But despite the recent house price falls, the average cost of a home is still 60% higher than it was at the start of the decade.
Nationwide said even if prices continued to fall during the coming two years, at their trough they would still be around a fifth higher in real terms than at the millennium.
House prices have fallen in all regions of the UK during the past year, with drops accelerating in southern regions of the country compared with northern ones.
Annual drops of 11.4% were recorded in East Anglia and the south west, while prices fell by more than 10% in the outer metropolitan areas of London, the south east, and Yorkshire and Humberside.
Even in Scotland, where the slide in house prices is the slowest, the average property has still lost 7.1% of its value during the past year.
