Nash Peters

HOUSE PRICES DOWN 15% IN YEAR-LONG CRASH
Source: ifa

Prices are now at their lowest point since February 2006 and many consumers believe prices will continue falling through 2009.

Nationwide’s house price index found the average British home cost £158,872 in October, down 14.6% from a peak of £186,044 in October 2007.  Prices fell 1.4% between September and October.

Transactions as a percentage of housing stock have hit a record low in 2008 so far, a key indicator of the market’s health.

The time taken to sell property has also increased dramatically, with the average home taking 12 weeks to sell, compared with 7.4 weeks a year ago.

However, Nationwide’s chief economist, Fionnuala Earley, says the rapid slowdown in market activity is unusual compared to other economic indicators.

"In some ways this lack of activity is puzzling," she says, "given that the last time turnover rates approached this level was in the early 1990s when market conditions appeared more hostile.

"In 1991 interest rates were at more than twice the level of today and general macroeconomic conditions were much worse. The economy was in deep recession and unemployment was well over two million. This suggests that there are other factors playing a part in the lack of activity in the current market."

Earley expects the continuing economic turmoil to affect the timing of a house price recovery. However, she says interest rates are likely to be cut by a further 0.5% this year, with further cuts in 2009, which should help soften the blow of a recession for the housing market.