House prices decline at fastest rate for over a decade

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by Kay Murchie

Consumer confidence declines further as property prices fell at their fastest rate for 12 years in November. Statistics released this week from the Nationwide Building Society house price index showed a 0.8% fall in house prices during the month.

The fall of nearly £1,500 took the cost of an average home to £184,099 and reduced the annual rate of inflation to 6.9% from the 9.7% recorded in October. In spite of the decline, the average property in the UK is still £12,000 more than 12 months ago.

Concerns of a housing slump have been further fuelled by the Council of Mortgage Lenders (CML) warning that the tightening of lending criteria could result in borrowers facing a much-reduced selection of homeloans.

Many property experts are anticipating a serious downturn in the housing market. The decline in property prices in Nationwide’s index is in contrast to October when it announced a 1.1% increase in prices while others, such as Halifax’s report, had shown the average cost of a home tumbling.

Nationwide chief economist Fionnuala Earley said higher borrowing costs and stretched affordability had led to the lack of confidence in the market. Figures this month show that the housing market is indeed cooling in line with the weakening in housing market drivers.

Ms Earley added that house purchase approvals and a good measure of real market demand, have weakened from a level of 128,000 a month in the final months of 2006 to 102,000 in September. This activity is expected to continue to fall back throughout the remainder of this year and into 2008.