UK house prices post biggest fall since 1993

UK house prices post biggest fall since 1993
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First Published: Fri, May 02 2008. 04 13 PM IST
Updated: Fri, May 02 2008. 04 13 PM IST
Matt Falloon and Sumeet Desai/ Reuters
London: British house prices took their steepest annual fall in 15 years in April, data from Britain’s biggest mortgage lender showed on Friday, stoking fears of a deep downturn this year.
The weak figures from HBOS Plc come after a Bank of England policymaker warned house prices could fall by more than 30% and add to the woes of Prime Minister Gordon Brown, whose Labour party has suffered heavy losses in local government elections.
“This is a dark cloud that is getting ever darker for the economy,” said Alan Clarke, an economist at BNP Paribas.
House prices fell 1.3% on the month to $375,700 last month, the third monthly decline in a row, leaving prices 3.7% lower than April last year.
That was the biggest yearly decline since June 1993, analysts said, when the British economy was still in the throes of a protracted housing slump.
“We expect house prices to fall 7% in 2008 and 9% in 2009,” said Howard Archer, economist at Global Insight.
Bank of England arch dove David Blanchflower said this week Britain’s economy could fall into a recession and house prices could dive unless policymakers acted immediately to shore up growth.
But most analysts expect the central bank to wait until June before trimming rates again, having already reduced them three times since December, as inflation is running high despite the slowing economy.
More than 25,000 people declared themselves insolvent in England and Wales in the first three months of the year and while that was 13.2% lower than the same period of 2007, analysts warned the outlook was grim.
Bankruptcies
“The effects of the credit crunch are only just showing up in some of the hard data, so it is premature to expect the data to show a tidal wave of insolvencies at this stage,” said Clarke at BNP Paribas.
“However, this will come and become an increasingly prominent issue along with repossessions towards the end of the year,” he said.
Activity in Britain’s construction sector fell for the second month running and at its fastest rate since December 1998, according to a survey by the Chartered Institute of Purchasing and Supply published on Friday.
While the housing downturn is gathering pace, prices have nearly trebled in the last decade and analysts said record levels of employment suggest the market is not about to crash as it did in the early 1990s.
The Nationwide building society reported the first annual decline in house prices in 12 years in April and a record high proportion of surveyors are reporting falling house prices across the country.
Last month, Halifax reported house prices falling 2.5% on the year, the fastest monthly rate of decline since 1992.
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First Published: Fri, May 02 2008. 04 13 PM IST