(1888PressRelease)
April 26, 2008 - House prices have fallen for the fifth consecutive month, according to the latest figures from Nationwide, adding to fears that the UK housing market could potentially be facing its worst crash in history.
Data from HBOS, the UK’s leading mortgage and savings provider, show that prices fell 2.5% in March, the biggest monthly drop since 1992.
According to Richard Woolnough, manager of the M&G Optimal Income Fund, the initial estimate of a 5% year-on-year fall in the housing market could be far too conservative.
The British Banker’s Association (BBA) reported today that mortgage approvals, which are a reliable predictor of how house prices will perform in around six months’ time, are at their lowest level since 1997. Mr Woolnough said that projections of year-on-year falls of 5-10% for mortgage approvals are “likely to worsen, because the banks are becoming increasingly reluctant to lend, which means mortgage approvals, and therefore house prices, could fall much further”.
There are concerns that a crash in property prices, which could reach 30% lower than the peak levels reached last summer, may spread to the wider economy and cause a recession.
The Bank of England’s plan to allow UK banks to swap mortgage-backed securities in return for government bonds has been welcomed as a positive step in helping the property market weather the effects of the credit crisis. However, many analysts do not think this alone will be enough. Mr Woolnough said that what is needed is for “central banks to slash interest rates in order to encourage borrowing again, which will eventually revive the housing market”.
A worst-case scenario in house price falls, with falls of up to 25% over the next two years, could see as many as one in four homeowners who had oustanding mortgages at the end of 2007 falling into negative equity.
The bleak outlook affects both the demand and supply ends of the market, with estate agents reporting drastic falls in inquiries and growing numbers of unsold properties. “With house prices continuing to fall, and mortgages harder to come by, there are fewer buyers and increasingly desperate sellers, who find they either have to cut right back on their asking price to make a sale or be prepared for a long wait,” said Lawrence Smith of Decision Homebuyers.
For press enquiries, please contact Phil Rendall on 020 7099 9026
Email: phil ( @ ) dhbuyers dot co dot uk
Web: www.decisionhomebuyers.co.uk
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Decision Homebuyers carries out daily surveys of the national media to provide up-to-date news and commentary on the UK property market.
