Prices Down Again!
01 July 2008
LONDON (Reuters) - House prices fell for an eighth straight month in June to stand more than 7 percent below the peak hit last year, a survey showed on Tuesday, adding to expectations that the once-booming market may crash.
The Nationwide building society said prices slipped 0.9 percent last month after a 2.5 percent drop in May which had been the sharpest fall since the series began in 1991. Prices were 6.3 percent down on the year, the biggest decline since December 1992.
House prices have been falling non-stop since peaking last October at an average 186,044 pounds. Economists say the outlook for the market is bleak due to tighter lending conditions, faltering demand and a slowing economy. Some are forecasting price falls of 15 to 20 percent this year.
'Plenty more downside (is) likely, not least given the dire mortgage approvals (data) released yesterday,' said Alan Clarke, UK economist at BNP Paribas. 'There is virtually no light at the end of the tunnel for the housing market.'
'Indeed, it is very possible the BoE's next move could be to raise interest rates, which could clearly be very bad news for the housing market,' said Howard Archer, economist at Global Insight.
Bank of England data on Monday showed mortgage providers approved the lowest number of new home loans on record -- just 42,000 -- because lenders have been forced to toughen up borrowing terms as they themselves reel from a global credit crunch.
Concern is now growing that a sharp correction in the housing market will spread to consumer spending and the rest of the economy. Furniture and households goods retailers are already suffering, as are Britain's homebuilders.
'The tightening of credit conditions along with changing expectations of house price growth and a general weakening in consumer confidence in the economy have led to a severe slowing in housing market activity,' said Fionnuala Earley, Nationwide's chief economist.
However, the Bank is unlikely to support the housing market by cutting interest rates in the near future because inflation is at its highest level in more than a decade.
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