House prices could fall by 25%

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by Lin Freestone

Graham Beale, the chief executive of the Nationwide Building Society, has predicted that house prices could fall as much as 25% from their peak, and he does not expect to see signs of recovery in the housing market until 2010.

The head of the UK’s biggest building society has warned that as many as 2.5 million homeowners could descend into negative equity.

If he proves to be correct, the cost of an average house could fall by almost £50,000 based on the average cost in October last year of £197,000.

He believes that signs of recovery will not be seen until 2010, echoing the opinion of Andy Hornby, the chief executive of HBOS, who has warned that he considers it could take at least 18 months before the market settles.

Talking to the BBC, Graham Beale said the US Treasury’s decision to shore up the two big providers of housing finance, Fannie Mae and Freddie Mac, should help to restore confidence in financial markets. However, it won’t swiftly revitalise the UK housing market, even though the UK’s prospects are inextricably linked to prospects for the US residential property market.