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Worst house prices fall for 18 years
Jonathan Prynn, Evening Standard28 Aug 2008
The property market faces a full-scale collapse with house prices tumbling by more than 10 per cent a year for the first time since 1990.
The average price has fallen by 10.5 per cent over the past 12 months, wiping about £30,000 off the value of a typical London home, according to the Nationwide building society.
The last time that house price falls were measured in double digits was in the autumn of 1990 during the depths of the last recession, when it took six years for values to recover.
The figures confirm there is still no sign of an easing of the credit crunch almost a year on from the collapse of Northern Rock.
A leading City forecaster is now predicting a full-blown recession for the British economy next year.
Capital Economics said GDP will fall by 0.2 per cent, which would be the first full-year drop in national income since 1991. Officially, the Government is still predicting growth of at least 2.25 per cent next year.
Another bleak set of financial results from leading companies this morning added to the growing mood of gloom as the City continued its return to work after the summer break.
Property agents and consultants Savills said its profits fell more than 40 per cent to £19.2million in the first half of the year and warned that there was "no sign of improvement" in the financial markets.
Chief executive Jeremy Helsby said he expects property prices to fall 25 per cent between January this year and December next year. But he added: "The good news is that in 2012, in London and the South-East, prices will recover to the levels they were in 2007."
Car dealer Pendragon said its firsthalf profits dropped 60 per cent from £33.5million to £13.4million and the number of cars it sold to private buyers fell eight per cent in the second quarter.
Chief executive Trevor Finn also said there had been "unexpected and significant" falls in second-hand car prices over the summer because of the lack of buyers and warned there would be no recovery until the end of next year.
Nationwide's figures showed that house prices fell by almost two per cent in August alone, the 10th consecutive monthly fall.
The building society's chief economist Fionnuala Earley said: "Recent activity levels in the housing market remain very subdued. House builders in particular have been reporting significant reductions in site visits and reservations of new properties since this time last year, in spite of a big increase in the use of sales incentives."
With estate agents around the country reporting very few enquiries from prospective buyers over the summer there is little hope that there will be a September bounce this year.
Nicholas Leeming, a director at online agents propertyfinder.com, said: "August was exceptionally quiet and July was also very quiet. There is likely to be an early shut down of the market for Christmas, so November will be dead as well as December. In any down period the quiet times come early."
The stream of bad economic news has made a mockery of predictions that the credit crunch, which flared up in the US last summer, would end this year.
In April Goldman Sachs chairman and chief executive Lloyd Blankfein said that people "feel like they're seeing the light at the end of the tunnel. We're closer to the end than we are at the beginning."
It is bad news for Chancellor Alistair Darling and for Gordon Brown's hopes of capitalising on the Olympic feelgood factor to revive his poll ratings.
The last time the housing market was in such a dire state the then Prime Minister Margaret Thatcher was ousted in a party coup and replaced by a younger rival.
• More than one in 10 London workers are not confident they will still be in their job in a year's time.
Fears about the credit crunch mean 367,000 people who work in the capital fear they will not be with the same employer in 12 months. Only four out of 10 are confident they will keep their jobs.
Brendan Barber, general secretary at TUC, which commissioned the YouGov study, said: "These poll findings show just how jittery people have become about the economy."
Reader views (5)
Blaming Boris just shows how thick you are Barry! The mayor has very little to do with house prices and the rest of the economy. You should have tried harder at school.
- Andy, crouch end, 29/08/2008 11:08
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The UK has no industry left except financial services so here is the answer to saving the economy.
1: Cut interest rates.
This will help those who signed up for loans they cant service and punish those few prudent fools who save for their future. It will drive the value of the pound down against other currencies making everything we buy more expensive (we have no exports except oil) and kick off a period of hyper inflation.
Soon houses will seem cheap again everyone will sign up for more 100% mortgages and the people making all those loans will get big bonuses again. Side effect those with savings and fixed incomes will be destroyed. Who cares they weren't supporting financial services.
2:IF that doesn't work give kids credit cards. Old enough to talk old enough to borrow. Add another 10 million financial services customers overnight.
- Mike, London UK, 29/08/2008 07:05
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Sorry Paulo, another 30K drop? Get ready for another 150K and then we're being realistic. Bottom line, the hype is over, people with NO MONEY have borrowed more than they should rightly earn in 3 life times, it's over and it's going to be a really hard landing. Enjoy.
- Steve Holmes, Westminster, London, 28/08/2008 23:34
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Has anyone noticed that when Ken was Mayor house prices rose for about 96 months. During that time we had record turn over on the high streets. Yet since Boris has become mayor house prices have fallen every month. Shops are closing, business's going bust and people out of work, Boris has over seen record repossessions, there were almost none when Ken was Mayor. Why has the brilliant journo Ghiligan not expossed this, Boris is turning into a nightmare.
- Barry Bunn, romford, 28/08/2008 23:10
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Only £30k yet they are still artificially high. Perhaps when the prices have dropped another £30K it will be closer to reality. The outrageous greed of estate agents & BTL wannabe property magnets is just staggering.
- Paulo, Ealing, London, 28/08/2008 13:48
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