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Average London home drops by £13,000 in a month
Nicholas Cecil, Political Correspondent15 Apr 2008
More than £13,000 was wiped off the price of the average home in London in a single month, according to official figures.
The 3.75 per cent fall - the biggest since government records began six years ago - saw prices drop from £351,315 in January to £338,109 in February.
The figures, from the Department for Communities and Local Government, came after surveyors warned that the decline in the value of homes was now more widespread than in the early Nineties. Research from the Royal Institution of Chartered Surveyors showed house prices falling at the fastest rate for 30 years.
But a DCLG spokesman said: "It's important to recognise we are dealing with a different situation in the market from what was experienced in the early Nineties. Today the issue affecting the market is credit supply, then it was high unemployment and high interest rates. The fundamentals of the economy are sound with high employment levels and historically low interest rates."
Across the UK, average house prices fell by 1.6 per cent to £217,737, the lowest level since June last year and down from £221,278 in January. The drop put annual property price growth in London at 9.5 per cent, with the rate falling from eight per cent to 6.7 per cent nationwide.
Reader views (3)
To all those who say or hear that 'it is different this time unlike the early Nineties', please remember that the definition and impact of issues such as affordability & outlook remains the same. Then (90's), affordability/demand was choked off by rising interest rates and once the expectation of falling house prices became prevalent, the market crashed. Now, affordability/demand is being cut short by a lack of finance coupled with vastly overvalued stock. Those who can arrange finance are facing higher arrangement fees etc making the actual cost of mortgages a lot higher than the headline Mortgage rate. Shortly, the expectation that will come to prevail is that prices will fall in the future. Once that happens, prices will fall again (substantially circa 50-60% in many parts of the UK). Looking forward beyond the price re-adjustment, what is going to allow the UK to recover from this reckless cheap credit fuelled boom? Three things certainly will not help 1) A Labour Govt - All spin..no substance, huge amounts of money wasted over 10 years without any real economic productivity gains; 2) 'The City' - Glorified gambling dressed as intelligent speculation and wealth creation, benefits no one; 3) Our own obsession with housing as an 'investment' - worst type of investment in economic terms because it doesn't actually create any real net wealth.
- John King, Chelsea, 15/04/2008 19:08
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Thank Heavens that we sold-to-rent a few months ago!
- Mark Wadsworth, Greater London, 15/04/2008 18:54
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The problem in the 90s was actually the same as the problem now - a fall in the availability of cheap credit, to which the housing market had become addicted. Mortgage outgoings, and thus house prices, are predominantly a function of the price and availability of credit. Interest rates might be historically low now, but as a result of the average debt taken on has tripled - so the effect of interest rate changes is magnified.
Readers with a good memory will recall, of course, that unemployment started creeping up after the wobbles started in the 90s housing market.
- Bob Frigo, Bristol, UK, 15/04/2008 18:52
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