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House prices plunge by £30,000
Hugo Duncan and Jonathan Prynn2 Oct 2008
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The storm clouds over the economy darkened today with grim figures from the housing market and the high street.
Mortgage lender Nationwide said the London property collapse is accelerating as a direct result of the financial crisis - and warned that the situation will get worse.
Prices in the capital have dropped a record 9.4 per cent in the past year, wiping nearly £30,000 off the average value of a home, the building society said. The average price in London now stands at £274,124, down from £302,486.
Further gloom came with Marks & Spencer's announcement that its sales were down by 6.1 per cent in a year, as once loyal customers switched to cheaper stores to cut their bills.
The latest batch of bad news heightened fears that there is no end in the sight to the worsening downturn. Nationwide chief economist Fionnuala Earley said: "The turbulent events within the City have clearly not been helpful for overall economic sentiment in the capital, and it is quite probable that going into the final quarter of the year, the aftermath of September's financial market gyrations will have a further negative impact on house prices in London."
Nationally, the average value of a home tumbled 12.4 per cent last month from £184,723 a year ago to £161,797 - a fall of almost £23,000. Prices fell more than £3,000 in September alone. Ms Earley said the past 12 months had seen "some astonishing and unpredictable developments in the housing and financial markets".
City economists branded the Nationwide figures "pretty ugly" and warned the slump in the market will be deeper and longer-lasting than previously thought.
In September last year, when the credit crunch had just begun, house prices were rising at a rate of nine per cent and 40 per cent of first-time buyers were borrowing more than 90 per cent of the value of the home.
Today, prices are falling at record rates, mortgage lending has dried up, and less than 20 per cent of first-time buyers are borrowing above 90 per cent.
Reader views (46)
We may see the averge house drop below 100K in the next few years and also not see 2007 prices for 30 to 40 years. Its different this time than the early 90s . The banks have been badly burnt on dot.com start-up proportions. We have created a huge bubble that has just exploded. This Crash will follow the Tulip Crisis, South Sea Bubble and Wall Street Crash in plummeting proportions. Cheap Credit RIP.
- Joe, Derby, 03/10/2008 09:21
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Greetings from across the Pond. I am an American in North Carolina. I am also a lifelong Anglophile. Had the pleasure of visiting many times and look forward to future visits. I truly believe the drop in housing is a healty correction to a highly inflated market that has become pandemic. There is a sense of entitlement that one must have it all by age 30...not a healthy value system. I hope that when we all get through this pain of economic correction we will have wrung out the greed and excesses that brought us to this point. As you know it is not a pretty picture here and we have seen a similar downward spiral in other places. Cheers and I wish you all well.
Linda in NC
- Linda, North Carolina USA, 03/10/2008 04:59
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Earlier in the day the headline for this article was "House prices crash by £30,000" but now it says 'plunge'...
Are you lot still scared to call it a crash? Come on!
- Johan P, London, England, 02/10/2008 23:55
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Another 40per cent and we may be back to sane prices and real values.
- C Adams, pont l abbé france., 02/10/2008 22:20
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Why on earth do some people think that profiting from housing is a problem? They are sad characters. The same people almost certainly profit from the viability of their firms which are based on all kinds of economic bets. Housing is a business - like banks or any other part of the economy. Get real.
- Claire Moran, London UK, 02/10/2008 22:03
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It's interesting that the same people who take it for granted when their house price (i refuse to say value) triples, refuse to believe that they will then halve. If scientists decide to look for the blind optimism gene i know where they should start looking!
- Waiting, London, UK, 02/10/2008 20:58
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This is just the beginning of the collapse. Don't forget we are still only "on the verge of a recession". We are a year behind the USA and houses once selling for $80,000 in Detroit are now being auctioned off for $1,000 each. If you're going to sit on your house and can keep paying good for you but as a renter who's been waiting patiently i'm looking at the inevitable forced sales, the repossessions, the lemmings who leveraged up a daft buy to let "portfolio", the sales to pay death duties, the jobless downsizing in a hurry. Everyone who overextended with the naivety that house prices will only go up is at risk and from the conversations i've had that is a frightening number of people. I'm amazed that people are thinking now's a good time to grab a bargain, in a year or three i expect them to be half what they are now.
- Waiting, London, UK, 02/10/2008 20:19
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This has happened before and quite frankly house prices simply will not fall forever. There is actually a shortage of housing especially family houses within reasonable distance of London and near good schools. All we are seeing is an utterly dysfunctional credit market choking the market. In 2 years time prices will have steadied and those gleefully hoping for a crash so that can buy will still be renting.
- James, New Malden, Surrey, 02/10/2008 19:44
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Some basic maths John. 0% of anything is NIL! x% of £300,00 is more than x% of £250,000. When you start charging a flat fee based on the type of house I might actually start to believe you. Sadly I find estate agents less honest than used car dealers!
- Michael, London, 02/10/2008 19:08
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I look foward to house and flat prices becoming closer to the 3x / 4x earnings multiples that the long term price trend indicates. Then I might just be able to finally afford something to buy.
- Ian M, England, 02/10/2008 18:52
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That's the right attitude Sean, however I sold my flat 5 months ok for top dollar and can't wait fo prices to blummet another £30k before I buy again. This will help everybody!
- Nat, london, 02/10/2008 18:21
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the prices will fall more then half just wait and see next year....
- Mustu, walthamstow london, 02/10/2008 18:16
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House prices are still well above trend and have much further to fall. Perhaps if the government takes strong measures, starting with a full guarantee of bank deposits, they will not fall too far below trend before they rise again during the inevitable inflationary surge that the authorities will engineer to burn off the massive increase in national debt on both sides of the Atlantic.
- Ken Davies, Paris, France, 02/10/2008 17:40
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I paid nearly 200 grand for my 3 bed. I do not care if the price goes up or down I intend to live there, it was not purchased as a investment, thats the problem with this country greed greed for money and greed for profit. If you bought a house to live in then stop moaning if you bought for financial gain and the price is tumbling then hard luck get used to it you gambled and you lost.
- Sean, London, 02/10/2008 17:18
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Come off it John: everyone knows estate agents put in phoney bids to screw more money out of the buyer and bid prices up. Estate agents encourage gazumping, and are squealing in pain now that gazundering has started happening. They have made their bed...
- Neil, london uk, Airstrip ONE ., 02/10/2008 16:50
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I'm glad they are falling. I have a shared ownership flat that I bought 50% of 7 years ago when I was earning half of what I am earning now thinking that as my wages rise, I would be able to buy more of it, but I have not been able to do this as although my wages have doubled, the price of my flat has also doubled
- Nu, london, 02/10/2008 16:42
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ABN Amoro had a report in April 2007 stating that in their opinion house prices were overvalued by at least 40%. There is more of this to come.
- Andrew, Exeter, Uk, 02/10/2008 16:38
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It all evens out really. I sold my flat in 1995 for £10k less than paid for it [last property slump] but bought my house for a lot less too. Glad prices are coming down as then first time buyers can have a chance.
- Angela, London, 02/10/2008 16:37
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Mark in St Albans,
I'm happy and I bought a house 10 years ago.
Maybe it's because I know I will pay a lot less to up-size in a year or so.
It's not just first-time-buyers that should welcome a drop in prices. In fact, unless you're a buy-sell speculator, house price rises benefit very few of us indeed...
- Cp, London, UK, 02/10/2008 16:22
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Whose house prices are falling that much, because whenever I look to see if I could afford a stupid excuse of a 1 bed flat, they still cost over £110k in most places in London.
- S-M Hearmon, London, UK, 02/10/2008 15:52
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"Good! It needs to drop by half current levels at least for me to be able to afford my own home."
Louanna - you won't get a property that easily because existing owners aren't willing to sell until prices go up again (unless they absolutely have to), and if those that do want to sell will be hard-pushed to find a buyer who can get a mortgage. I certainly am going nowhere for a few years, thank you very much.
- Yvonne, Doncaster, UK, 02/10/2008 15:52
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How far can they fall? My bog standard mid-terrace pile of damp bricks was valued over £400K last summer. I bought it for £116 in 1992. Deeds show that it sold for about £12K in the late 70's. The original price was £3K in 1875.
- Squater, Herne Hill, 02/10/2008 15:33
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Who thinks this is a bad thing except estate agents?
- Nelly, London, 02/10/2008 15:28
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Thirty grand? Pah. If the average London property is now 'valued' at around 270K (down from 302K), how is someone on an average London salary of around 30K supposed to afford it? It's still NINE TIMES INCOME!
Prices must, and will, fall much further.
- Cp, London, UK, 02/10/2008 14:51
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Why is it "good" when food, or petrol, or vacuum cleaner prices go down -- but "BAD" when house prices go down?? Can't you just GROW UP?!?
- Peter, Wells, Somerset, 02/10/2008 14:46
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With respect Michael as a mortgage broker I can tell you that brokers and estate agents dont care how much your house is worth. You see as a broker we get paid a broker fee, commision from the solicitor, life cover commision , buildings and contents commision and lastly a proc fee from the lender. All we care about is the sale. Estate agents they dont care how much your house is worth they just want to sell it. The more they sell the more money,0% commission on 1,000,000 is £0.00
It s the greedy public who bid up the price
- John P, United Kingdom, 02/10/2008 14:34
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House prices are not crashing because of the City financial crisis. The City financial crisis is because of the fear now reality of UK & US house prices falling.
- C, London, UK, 02/10/2008 14:26
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London house prices are still 40% overvalued, and this banking crisis will ensure they are corrected...
- Mike, London, 02/10/2008 13:53
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Politicians are principally to blame for the state that we are in and the impending financial collapse of the World Economy
For why is it that governments around the world did nothing until financial death was knocking on the door?
For they were told at least five years ago about the dire state of the international financial markets. In this respect clear examples of this knowledge that they had at the time were,
1. In 2003 the former US Federal Reserve chairman Alan Greenspan warned of the forthcoming financial collapse if Fannie Mae's activities were not reined in. The government did nothing and Fannie Mae was allowed to continue operating until only last month, some five-years after the warning from the US’s top banker was given. Indeed, the 30% of mortgages in the US, which are toxic mortgages, equates to losses for the banks of $3.1 trillion. Therefore how could politicians overlook such a failure it has to be asked? The only answer can be incompetence and complacency at the highest level.
2. In 2006 the Bank for International Settlements, the world's most prestigious financial body and the central banker’s ultimate bank, stated that the financial world was in a diabolical state and that it had to change its current ways and activities. No government throughout the world intervened until it is was too late and where caution was not on the agenda for them just a mere two years ago.
Clearly therefore it is the politicians who are to blame for all the mess.
- Dr David Hill, bern, swiss, 02/10/2008 13:40
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The fact that the average house price in London has doubled in the last 5 years, makes 30k in 12 months an almost unnoticeable amount in the scheme of things. London prices are almost 2 to 3 times the national average as it is. This hardly consitiutes a 'Collapse' but merely highlights the fact no one is moving because they can't get a mortgage. People are stay put.
- Big Andy, London, 02/10/2008 13:32
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Mattew, Neil and Dan...
The only reason you're happy is because you didnt have enough to get a house the last time...
If you buy now I expect you dont want it to drop further otherwise your smugness may wipe away..
Most people who bought 5 - 10 years ago will need it to drop 100 - 150k before they lose money and that just wont happen.
- Mark, st albans, 02/10/2008 13:17
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House prices inflated by irresponsible lending were a recipe for the disaster that is now upon us. To avoid a repeat of the current problems regulations need to be imposed on lenders. A minimum deposit of 25%, sensible set mulipliers of income, interest rates fixed for the term of the mortgage & a vehicle to repay the loan at the end. This is a simple answer to avoid financial meltdown.
- Rob Gooner, London, 02/10/2008 13:13
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Good! It needs to drop by half current levels at least for me to be able to afford my own home. Prices in my area have gone up 25% each year for every year Labour has been in power.
- Louanne, London, 02/10/2008 13:03
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No it is crashing beacuse houses are over priced. The UK is in for a wide spread housing meltdown just like they have been having in the U.S for the past 3 years; with years of absurd gains is what going to happen.
- Brandon Thomas, London SW7, 02/10/2008 13:03
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UK housing has been vastly overpriced for years. What surprises me is that they have held up for so long as I expected them to drop three years ago. It is more a re-adjustment than a crash. The main gainers during the rampant house price inflation were estate agents and mortgage brokers feeding their commissions! Maybe at the end of this there will be a degree of normality again.
- Michael, London, 02/10/2008 13:01
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The lemmins who paid a fortune for some London dump could sue the BBC for it's stupid property shows. The prices need to go down a lot more.
- Frederick, London, UK, 02/10/2008 12:59
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Dan, Neil & Matthew - the bitter sound of jealously I detect. In 10 years time when prices go up I am sure you would of all become one of the bores you hate so much.
- Fly, london, 02/10/2008 12:55
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At last I have a chance to get back into London! Let them keep falling & maybe I can afford a rabbit-hutch in my spiritual (& previous long-term) home of North London, after being exiled out on Essex coast for 10 yrs.
Mind you, I've gotta sell up here first...
No doubt the mega-rich won't be affected -they never are.
- Exile-From-London, Colchester, 02/10/2008 12:54
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Hallelujah! If there's one positive thing to come out of this greedy, gambling, bankers' mess it's the fact that some sort of sanity is slowing resuming regarding property prices. For far too long property owners and, to a large extent as well, estate agents have over inflated the market making it difficult for first time buyers to get on the ladder. I'm astounded still at some of the prices fpr properties in zone 5 and zone 6 areas - which makes you wonder what on earth you're paying for in the first place?!! Now, those that chose to bide their time, save and wait can confidently make a killing and negotiate for less than the current asking price...and rightly so too!
- Ali Sichilongo, London, 02/10/2008 12:06
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Calling Airstrip One....the so called 'House-price bores ' will now be waiting and ready to start buying some more when the prices are right. The winners always win.
- Steve, Barnet, 02/10/2008 11:54
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Can't help but think that people celebrating / gloating about house price falls at the moment are either delusional or it is just sour grapes. House prices falling isn't going to mean people can buy easier, since banks aren't going to lend much at all, and definitely not at a great rate. The only people who it will benefit are the ones with a huge amount of money lying around! Makes no difference to the average person, unless they are looking to move imminently, apart from on paper.
- H M, London, UK, 02/10/2008 11:36
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Another £50,000 off and we have a bedroom 75,000 and we get a bathroom, nearly there!!
- Mr S.Port, London, 02/10/2008 11:35
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Well most houses are tens of thousands over valued anyway so this is no bad news I think. Even if my house goes down so will any house I want to move to also, plus I'll have to borrow less money to buy it. Excellent.
- Louise, Essex, 02/10/2008 11:34
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Good. Bring it on!
- Dan, London, 02/10/2008 11:07
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At last! No more tedious conversations about how much house prices have gone up this week! House-price bores must be spluttering in their smoothies and choking on their Gojo berries.
- Neil, london uk, Airstrip ONE ., 02/10/2008 10:17
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About time
- Matthew, London, UK, 02/10/2008 10:02
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