U.K Housing Prices See Largest Annual Decline In A Decade

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by Elisha Sanders

The U.K. has seen the largest annual reduction in housing prices in over a decade, with prices falling 3.8% since this time last year, and 2.4% since last month.

The Halifax stressed that this should be viewed in juxtaposition with the dramatic increases in the housing market over the past 6 years. Data put out by the Halifax has shown that, on average, houses in the UK went up by 79% between 2002 and 2005. This meant that the average house in Britain costs £88,000 more than it did in 2002.

According to a survey of economists conducted by the Dow Jones Newswires, there was an expectation that the housing market would see a steady decline this year, on average 1% from month to month, though the overall yearly expectation was a reduction of just 3.5%.

Chief economist for Halifax, Martin Ellis, said that home buyers have been put off in the last few years by the sky rocketing prices, which has subsequently seen prices start to come down again, though the current credit market turmoil and the reduction in spending power of consumers have also had a large effect.

The Organisation for Economic Co-operation and Development (OECD) has stated that the decline in the housing market is a mirror of broader economic issues within the UK. They went on say that the world is currently experiencing the most severe economic nosedive since the recession of the 1990s, and to warn of the danger faced by the UK in the coming months. The UK economy is singularly at risk of being among those hardest hit by the current economic situation, as the British government already has tax rates at a very low level, which means that they could not afford to reduce them at all. The OECD concluded by saying that the British could expect housing prices to reduce by as much as 10% this year, and that unemployment is going to reach levels not seen for the past ten years.

Chief economist at Global Insight, Howard Archer, has also given his opinion of the current decline, saying that the trends are concerning and that home loans are becoming more difficult to acquire due to home buyers being more financially strapped in general.

The bank of England is deliberating today, over whether to cut interest rates, which house builders have been strongly advocating, however concerns are now mounting over rising inflation which is likely to see the Bank put fears of a recession on the back burner, and leave interest rates as they are.

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http://www.fairinvestment.co.uk/mortgages-news-House-prices-fall-while-mortgage-lenders-attempt-to-stem-repossessions–1701.html
http://online.wsj.com/article/SB121265371457848059.html?mod=googlenews_wsj
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/05/bcnhalifax205.xml