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Houses prices continue decline in value

05/06/2008

Britain's house price slump continued into the summer with values falling 3.8 per cent in the year to May, Halifax says.

Its new research found average house prices slipped 2.4 per cent during May itself. This suggests the 1.3 per cent fall in April was a blip, with March's loss being recorded at 2.5 per cent.

The results closely mirror the findings of the Nationwide house price index, which finds house prices fell by 2.5 per cent in May the fastest fall in 17 years.

"The latest data on the housing market are undeniably alarming. Clearly, the downward pressure on house prices coming from stretched buyer affordability and tight lending conditions is now biting hard," said Howard Archer of research firm Global Insight.

"Elevated affordability pressures on potential house buyers stem from high house prices and modest real disposable income growth, while ongoing tight credit conditions are leading to significantly fewer and more expensive mortgages being available."

Global Insight now predicts house prices will fall by 12 per cent in both 2008 and 2009 – revising its forecasts down from a previously we had expected drops of seven per cent in 2008 and nine per cent in 2009.

This, however, is well ahead of the Council of Mortgage Lenders' (CML) expectation of a seven per cent fall by the end of the year.