Property prices record their biggest consecutive decline

Article source: Grainne Gilmore and Catherine Boyle -

Property prices record their biggest consecutive decline

The latest figures from the Halifax show that house prices have depreciated for the last eight consecutive months; in this month alone wiping £2,000 from the value of an average home.

The new average value of a home is £172,108, contrary to £200,000 just 13 months ago. This 13.4 percent yearly fall is the largest decline so far since the Halifax series began 25 years ago. House prices in the quarter to September 2008 were 12.4 percent lower year on year; this is another record low.

This consecutive run of falling house prices has gone beyond that of the 1990s, when the longest run of property price falls was seven months in a row.

The homeowners will not receive news of the further fall in house prices well. Shocking further still, given the pleasing news yesterday, from the Bank of England, which had cut its interest rates by half a point to 4.5 percent. Over 4 million home owners have mortgages which are linked to either the Bank of England Base rate or their mortgage lender’s standard variable rate [SVR]; it follows, given yesterdays announcement that mortgage holders will be saved hundreds of pounds from their annual mortgage bill.

This however is not evident to all mortgage lenders as most of the mortgage borrowers will have to wait and see if their lenders will also reduce the lending rates. Several lenders have already responded and have reduced their standard variable rates. They are HBOS Lloyds TSB Barclays and HSBC. The Nationwide Building Society, Northern Rock and Abbey they are yet to decide what action they will take.

Some analysts are saying that the fact that the fall in house prices in September was the modest witnessed since March may be an indication that the fall in house prices is slowing down.

The chief economist at the Halifax, Martin Ellis, said that the overall price decrease in the three months to September was very similar to that in the previous quarter indicating that the trend rate of decline might be beginning to stabilise. But economists warned that there was more pain awaiting homeowners. Howard Archer chief economist at Global Insight said that house prices seemed poised to fall substantially further as the fundamentals remain largely negative.

Seema Shah of Capital Economics said: “The bottom line remained the same: house price falls still have much further to go.”

Capital Economics said that the house prices would go down by 35% from their peak in August last year while others are still waging that the prices will fall by 30 percent.

Oliver Gilmartin a senior economist at Royal Institute of Chartered Surveyors issued a stark warning that all, except the very cash rich, first time mortgage buyers will still find it difficult to secure a mortgage in spite of the recent bank rescue.

He also stated that a return to the lavish days of bank lending based on small deposits is not in the pipeline, with a faltering economy likely to raise the numbers of payments arrears. The fall in the number of first time buyers will also drag house prices down further; vendors will be forced as a result to drop house prices in order to sell.

Other analysts believe said that house prices could be potentially falling a lot faster than the Halifax Series suggests. The Liberal Democratic Treasury Spokesperson, Lord Oakeshott of Seagrove Bay, commented that the Halifax series was misleading as its figures were only based on the low number of properties that had been approved for a mortgage.