Nationwide: UK house prices down 14.6%
The rate of decline in house prices in the UK is accelerating. Today the Nationwide released their monthly UK-wide figures on house prices and the numbers were fairly grim. House prices fell 1.4% in the last month alone, bringing the annual fall to 14.6% or nearly 20% in inflation-adjusted terms.
This is the 12th month in a row that house prices have fallen in the UK. Obviously the UK is following in America’s footsteps and looks poised to have a very sharp property fall — worse than in the early 1990s.
Ever upbeat, Fionnuala Earley, Nationwide’s Chief Economist gave a downbeat prognosis with a positive spin:
“House prices in the UK fell for the twelfth consecutive month in October. The price of a typical house is now 14.6% lower than at this time last year, the peak of the market. The typical house price fell by 1.4% in October, around the same rate as the average monthly fall of 1.3% over the last year, but lower than the monthly falls recorded in each of the previous three months. The price of a typical house is now £158,872, almost £30,000 less than a year ago, but to put in context, still almost £30,000 more than five years ago.”
She did add:
“A looming recession and continued financial market instability have uncomfortable implications for the housing and mortgage markets, and will undoubtedly affect the pace of recovery in house prices. However the speed of the economic slowdown and the determination on the part of central banks to return stability to the financial markets does mean that interest rates are likely to continue to be cut sharply which will make life easier for borrowers on variable rate loans and those coming to the end of fixed rate deals. The half percentage point reduction in October will not be the last rate cut of 2008 and the possibility of even deeper cuts this year is increasing as the Bank of England attempts to prevent a deep and prolonged recession. We believe rates will be cut by at least 50bp in the last two months of this year, but would not rule out larger moves, particularly if further co-ordinated action by central banks is warranted.”
So, property prices in the UK are going lower in the near term — probably much lower. The numbers are accelerating because annual declines are now 14.6% where they were only 12.4% in September and 10.5% in August.
It remains to be seen at what pace this decline will take, but all evidence shows that the declines have become greater in the South, where many are tied to the financial sector. See the Nationwide press release below or further details.
Last posts on UK prices
UK house prices fell another 1.7%, now down 12.4%
Nationwide: UK house prices down 10.5%
Source
Twelve Months of House Price Falls – Press Release, The Nationwide
It remains to be seen at what pace this decline will take, but all evidence shows that the declines have become greater in the South, where many are tied to the financial sector.
That is indeed true mostly of London properties and of south west England where many of the square mile folk bought country homes.
There is also the global margin call phenomena spreading to the buy-to-let sector. Where I live I’ve observed all the “FOR SALE” signs being replaced with “TO LET” signs. The cottage industry of amateur buy-to-let investors will rapidly unwind as equity value falls, and as oversupply and falling rents fail to cover even the interest payments on these BTL mortgages.
Furthermore, unless the credit market unfreezes in earnest, the LIBOR against which mortgage interest rates are set will continue to resist declines in the Bank of England’s interest rates. This will keep many first time buyers (who also have their salaries to worry about) away in spite of plummeting prices.
And of course this will have a direct effect on the high street. Just like Americans who used their home equity as an ATM, many Brits were doing the same through remortgaging.
you probably know that I was living in London through 2000. Even then prices were starting tho getout of control. Over the next few years it only got worse and by 2003 I was expecting a fall in prices.
Easy money stepped in and reflated things and now we see the consequences – a much harder fall for the Southeast. Could the MPC have done anything about this?
It’s hard to say, because the Yen and Dollar carry trade buoyed London and te South East along with the financial sector.
It is sad what is happening but good for renters like Alice at UK Bubble
Over the next few years it only got worse and by 2003 I was expecting a fall in prices.
There was a slight slowdown in 2005 which prompted a few to sell and start renting. In hindsight, they were the lucky ones.
Easy money stepped in and reflated things and now we see the consequences
And the conduits for that easy money in the latter phase of the bubble often involved the most vulnerable of people – sub-prime and NINJAs. Due to the people interest story, the media picked up on this first, but I feel it is BTL where the major falls will occur.
Also, much of the price rises in the last two years or more of the bubble were completely scandalous. Builders marked up the houses/flats but then enticed buyers by offering it to them as a discount in the form of a downpayment to their mortage provider. In effect the property developers were paying this markup to themselves. Often, an 85% mortgage was in reality a 100% mortgage, and this price distortion was also reflected in the Land Registry duping would be buyers into believing that the boom was still on.