Residential property prices in all regions of the UK have fallen this month with values dropping by the most in 18 months, according the latest real estate index published today (Monday September 27).
The average cost of a property fell 0.4% from the previous month to £157,600, according to the Hometrack index. It was the third consecutive monthly drop and the biggest since March 2009. Housing demand has fallen the most since January 2009.
Prices rose in September by 1% from a year earlier, the least in seven months, Hometrack said. Demand for homes, measured by the change in new buyers registering with real estate agents, fell for a third month, dropping by 2.9%.
Prices fell in all regions for the first time since April 2009. The decline in demand has been strongest in southern England, which experienced the largest price drops in the last three months. Prices fell 1.1% in London and 1% in southeast England in that time, the index shows.
The report adds to mounting evidence that the real estate market is weakening as the UK government prepares the biggest budget squeeze since World War II and banks curb lending.
Leading economists and analysts are predicting further price falls towards the end of the year. Bank of England Chief Economist Spencer Dale said last week that values may fall further after the small size of declines during the recession surprised people.
‘Clearly, house prices have fallen, but I think most people have been surprised by how little house prices have fallen over this period. House prices have fallen 10% or so in this period. It could be that we haven’t seen it all and that more is still to come,’ Dale said.
September’s price declines are part of an ongoing re-pricing process which began six months ago in early spring, and which is set to stretch well into 2011, said Richard Donnell, Hometrack’s director of research.
‘Growing concerns over the economic outlook and public spending cuts are weighing heavily on would be purchasers,’ he explained.
However he believes that a surge in the supply of homes for sale should slow and help limit price declines in the next year. ‘While demand is set to fall further in the coming months, we also expect the volume of new supply coming to the market to moderate,’ Donnell said.
‘Talk of a double dip, with the implication being that the market will see double digit house price falls, is overdone despite the weak outlook for demand,’ he added.
Analysts point out though that it is becoming increasingly difficult for would be buyers to get a mortgage. The latest figures from the British Bankers’ Associations shows that mortgage approvals fell to a 16-month low in August.