House Prices Down By 2.5% In May
Nationwide figures show a 2.5% fall in house prices in May, and an annual fall of 4.4%. With mortgages and the economy in the state they are, it is likely that house prices will continue to fall through 2008 and 2009.
After seven months of falling house prices, the downward movement accelerated in May to bring us closer to a 1990s-style property crash.
Latest figures from Nationwide Building Society show a 2.5% fall for prices in May – their largest drop in a single month since it first started recording house prices in January 1991. The seven-month decline in prices is the longest run of falls since 1992, and the annual house price drop of 4.4% is also the biggest annual fall since the same year.
The 2.5% fall in May has shocked industry watchers, and it may advance grudging acceptance that we really are in the midst of a property crash.
The problem is that with mortgage costs showing little sign of coming down, but house prices likely to be “lower next month”, people are reluctant to join the queue to buy houses. Buyer affordability is stretched and lending conditions are very tight.
It is a recipe that suggests that 2008 will see a double digit fall in house prices and 2009 is unlikely to see an upturn.
From April to May the price of an average house in Britain fell by about £5,000 to £173,583. The annual fall is now at around £8,000.
Economists still say that Britain is in a good position to weather this property storm – better than in the ‘90s, as less homes have been bought at the top of the cycle, and deposits have been higher than just before the last crash. However, most of the population is suffering from higher food, fuel and energy prices, and the general economy is coming under threat. There will be real problems if unemployment starts to rise significantly.
The credit crunch has meant that mortgage lending has slowed dramatically, and even with house prices coming down, first-time buyers still cannot see a way onto the property ladder. With inflation at a worryingly high 3%, the chances are that the base rate may go up rather than down in June. That will only mean mortgage rates going up again. The end of the property downturn is a long way off yet.
