House prices are falling at an ever faster rate in the UK, according to Nationwide’s latest survey for August 2008. The Nationwide Index was down to 329.5 from 335.9 in July, a fall of 1.9%. The index is down 10.5% compared to August 2007, the first double digit fall in prices since Q4 1990. In July, those figures were only 1.5% and 8.1% down respectively, suggesting declines are still accelerating in the UK. The average home in the UK will cost you £164,654.
Fionnuala Earley, Nationwide’s Chief Economist, commented:
“Recent activity levels in the housing market have been very subdued. House builders in particular have been reporting significant reductions in site visits and reservations of new properties since this time last year, in spite of a big increase in the use of sales incentives. Reservations of new property began to feel the squeeze before any slowdown was recorded in the official number of house purchase approvals, but the two series have moved closely over recent months. House builders report that a lack of confidence in the market is the biggest reason behind the drop off in demand, although changes in lending criteria are also reported as an issue.
“Estate agents’ data across all property types is a little more optimistic and suggests that there may be some glimmers of interest returning to the market. Agents report an improvement in new buyer enquiries, perhaps stimulated by the recent falls in prices and the opportunity to negotiate a good deal. However, the reported numbers of sales have not been encouraging.
The ratio of sales to stocks has been a good predictor of movement in house prices. Current movements suggest that the increased supply of properties on agents’ books will continue to act as a dampener to house price growth in the short term.”
Compare this to the Case-Shiller index in the US, which shows a 15.9% decline in house prices there and the UK looks a bit better. Nevertheless, this news and the recent awful earnings reports from Bovis and Taylor Wimpey make it clear that the UK housing sector will continue to be weak for the foreseeable future.