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House prices fall 13 per cent ... the worst for three decades
Hugo Duncan and Joe Murphy9 Oct 2008
House prices have plunged more than 13 per cent in a year, knocking more than £26,000 off average values.
Mortgage lender Halifax said today that the average price of a home in Britain fell from £198,533 in September last year to £172,108 last month.
The 13.3 per cent decline, year on year, was the sharpest since Halifax records began in 1983 and left prices at about the same level as in January 2006.
Experts warned of further falls de-spite yesterday's emergency half-point cut in interest rates to 4.5 per cent.
Seema Shah, property economist at Capital Economics, said: “This will not change the outlook for house prices. After all, the UK economy is still on course for a two-year contraction, buyer confidence is muted, house prices remain overvalued, and lenders are likely to remain cautious.
“In addition, it is doubtful that interest rates on offer to new borrowers will fall as far as official interest rates. The bottom line remains the same: house price falls have much further to go.”
Prices fell 1.3 per cent, or nearly £2,200, between August and September, the eighth monthly fall in a row. The slump has now overtaken the Nineties housing crash, when the longest period of decline was seven months.
However, the 1.3 per cent drop was the smallest in seven months, raising hopes that the rate of decline has started to stabilise. Lenders including Halifax, Barclays and Lloyds TSB reduced their standard variable rates following the Bank of England rate cut yesterday, while some four million households on tracker mortgages will also benefit.
But with interest rates set to fall further this year and next, Cheltenham & Gloucester has withdrawn some of its most popular tracker deals.
The freeze in mortgage lending and demands for hefty deposits has stopped many would-be buyers entering the market. Howard Archer, chief UK economist at Global Insight, predicted prices would fall as low as £133,000 by the middle of next year — nearly £70,000 below their August 2007 peak. He said. “Credit conditions remain extremely tight. Meanwhile, affordability ratios are still very stretched despite the double-digit fall in house prices so far.”
However, Gordon Brown today painted an optimistic view of an economy heading for recovery as he forecast falling oil, food and electricity prices. The Premier said pressures on family budgets could fall “in the next few months”.
He told GMTV: “The one bright spot on the horizon ... is that oil prices are coming down. That's what has caused the hit on people's standard of living more than anything else.
“If we can get petrol prices down and gas and electricity bills down in the next few months, and we get food prices down with better harvests, then … that's something to be hopeful about.”
He acknowledged voters' anger, saying: “We have had bread prices going up very fast, milk and eggs and you know, the petrol pump. You get angry when you go to the petrol pump.”
Alistair Darling was set to fly to Washington today for talks on the economic crisis. Tomorrow the Chancellor will join G7 finance ministers to discuss a shake-up of the banking system.
Work and Pensions Secretary James Purnell highlighted measures to help those made jobless by the credit crunch. As well as benefits to cover interest payments on mortgages worth up to £175,000, the jobless will get help with CVs and even special payments to buy a suit or cover travel expenses.
With a Tory lead of more than 20 points halved in several opinion polls, Labour MPs were hailing a turnaround in the party's fortunes. One told the Evening Standard: “This could be our Falklands war.”
Margaret Thatcher clinched a general election win in 1983 a year after defeating Argentina.
Reader views (2)
Having recently visited the UK in September, 2008 I could not believe how over-priced real estate continues to be there - especially in London. Value for money is not on and house prices to salaries are way out of line - probably double the price they should be. As a retired banker I can fully understand the credit crunch in the UK where everyone is gambling in the property market and where the Banks are as overextended as they are in the United Sates in sub-prime mortgages. Good luck! One million pounds sterling for a 2 bedroom apartment in Maida Vale which has been recently foreclosed is still way out of line!
- Alp, Toronto Canada, 25/10/2008 15:17
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Having bought my 4-bed house in Windsor 14 years ago for £91K I really couldn’t care less house much they drop. Even if it had no resale value at all it still remains great value working out to about £6.5K per year.
This is where most people have gone wrong. A house is a place to live and not a way of making money, anyone with half a brain could see this crash coming. Average house prices look likely to settle somewhere between £110K and £140K.
- Ron, Windsor, UK, 10/10/2008 06:36
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