House prices fall £11,500 in a year.....

Jonathan Prynn, Evening Standard

1 July 2008

House prices are falling at their fastest rate since the depths of the early Nineties housing crash, according to the latest property market survey.

WILL BUY-TO-LET COLLAPSE?

Predictions of buy-to-let's demise continue but landlords are refusing to listen.

Another fall in values last month - the eighth on the trot - leaves the average price of a home in Britain 6.3% down since the start of the year and 7.3% below the market's peak last October.

The Nationwide Building Society said prices dropped 0.9% last month, less than the 2.5% recorded in May, but still with no end in sight to the property market slide.

Many homeowners are now losing almost as much from their property as they are earning from their job.

The average priced home in Britain has shed £13,500 in value since the market peak in the autumn, about two-thirds of what the average wage earner would have been paid in salary over the same period.

Fionnuala Earley, Nationwide's chief economist, said: 'The price of a typical house is now £172,415. This is over £13,500 less than it would have cost at the top of the market and over £11,500 less than this time last year.

'However, the strength of house price growth up until last year means that prices are still 4% higher than two years ago and 9% higher than three years ago.'

'It seems unlikely that there will be any rapid turnaround in housing market fortunes in the coming months.

'However, as prices continue to fall, affordability measures become more favourable for those in a well-financed position to buy.'

Today's Nationwide survey follows 'off-the-scale' figures on mortgage approvals from the Bank of England, which showed that they fell by almost two thirds to 42,000 in May.

Twelve out of 13 areas of the UK witnessed year-on-year drops in house prices during the three months from April, with only Scotland avoiding a decline. London still has the most expensive property in the country but is now falling in line with the rest of Britain owing to tighter controls on lending by banks, a squeeze on household finances and less secure job prospects in the City.

Prices in the capital fell 3.8% between April and last month, leaving them 2.3% below a year ago.

Ms Earley said that while the Bank of England had little scope for cutting interest rates now because of high inflation the situation should improve by the end of the year. She said:

'Our central expectation is that wage growth will remain stable, consumer spending will come under increasing pressure in the coming months and the economy will continue to slow. If this proves correct, the Bank's Monetary Policy Committee should feel able to adjust rates before the end of the year.'

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