Nationwide survey confirms 16% fall in 2008 house prices

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by Lin Freestone

The latest survey by the Nationwide Building Society indicates that house prices in 2008 fell by almost 16%, bringing the average house price down to £153,048.

In December last year, prices fell by a further 2.5%, which was the 14th consecutive monthly fall. House prices are now 18% lower than they were at the peak in October 2007.

According to the chief economist at Nationwide, Fionnuala Earley, 2008 was a year of turmoil in the UK housing market. The disruption in the financial markets worsened throughout 2008 and had larger implications for the real economy than was anticipated a year ago.

Fionnuala Earley said that this time last year we expected the housing market to cool quickly as affordability was poor and economic conditions looked set to weaken, but we did not anticipate the speed of house price falls or the extent of the global and domestic economic slowdown.

She warns that conditions remain highly volatile going into 2009, making it difficult to give a specific forecast for the year.

However, it has been estimated by Howard Archer, chief UK and European economist at IHS Global Insight, that house prices will fall another 15% over 2009 as people continue to have difficulty in securing mortgages and saving deposits.

The Halifax has also reported a 16% decline in 2008 house prices, which has now been endorsed by Nationwide’s figures.

Nationwide considers that demand from borrowers is likely to be an important factor in 2009. It is considered that potential buyers will be unwilling to make a move while they still believe house prices will fall further, and there is continuing concern that they may lose their jobs.

Ms Earley said that, until the economy and the labour market stabilise, it is hard to imagine households becoming upbeat about the immediate future for house prices and this will hinder the pace of recovery.