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House prices fall at fastest rate since 1990s slump
HOUSE prices have slumped by the greatest monthly margin since the property crash of the 1990s amid growing fears of a deepening economic crisis.
The nation's biggest mortgage lender, Halifax, released figures yesterday which revealed that house prices had dived by 2.5 per cent during March – the largest monthly drop since September 1992.
It also emerged that house prices are now just 1.1 per cent higher than they were a year ago, the slowest rate of annual growth for 12 years.
During the first three months of the year, property prices in Yorkshire fell by an average of 0.5 per cent, although the biggest falls were seen in the West Midlands, where the cost of homes slumped by five per cent.
However, despite the gloom enveloping the property sector, the majority of economists maintained that they did not anticipate a 1990s-style crash.
The Halifax figures have shown that house prices actually rose by 2.2 per cent in the East Midlands, 1.6 per cent in Greater London and by 1.4 per cent in East Anglia.
Halifax chief economist Martin Ellis said: "There is a fundamental difference (between now and the 1990s) in terms of the economic position.
"We have an economy that is still growing, we have a very strong labour market and low unemployment. What happens in the employment market is a key driver of house prices.
"That is very different to the 1980s and 1990s when inflation got out of control at 10 per cent, interest rates doubled and unemployment doubled. We are not expecting a repeat of those circumstances."
The Halifax stressed that overall house prices in Britain had increased by 171 per cent during the past decade and by 51 per cent over the last five years. The average UK property price has risen by 120,860 during the past decade from 70,696 to 191,556.
However, the global credit crunch is now having a bigger impact on the mortgage market than previously predicted, as lenders raise their rates, reduce the loan-to-value ratios they are prepared to lend on and pull deals that are attracting too much business.
This is having an impact on the housing market, reducing demand as some people, particularly those with impaired credit histories, struggle to get a mortgage.
It also limits the amount people can borrow, both because lenders are more averse to risk and because mortgage rates are higher.
However, economists stressed that while these factors are likely to lead to a fall in activity in the market, they will not in themselves trigger a house price fall. In order for the cost of property to dive steeply there would need to be a flood of homes coming on to the market.
Estate agent Andrew Beadnall, a partner of Beadnall and Copley which has branches in Wetherby, Harrogate and Ripon, has been involved in the property industry for 35 years.
His staff sold a 375,000 four-bedroom property in the centre of Wetherby subject to contract within 24 hours of the property coming on the market last week.
The sale of a five-bedroom detached home in the village of Clifford is being negotiated for an offer close to its 975,000 asking price only three weeks after it came on the market.
Mr Beadnall said: "For a deepening economic crisis, there needs to be high unemployment, which we haven't got, and high interest rates, which we haven't got.
"The vast majority of people put their house on the market because they simply want to move home. What is happening at the moment is that people are beginning to believe all the hysterical coverage in certain sections of the media."
The National Association of Estate Agents remained optimistic that March's dramatic fall in prices would not signal a long-term decline.
According to the association, the length of time to sell a home has increased from between 28 to 49 days to about 60 to 70 days, while sellers were generally accepting around 10 per cent less than their asking price.
Association vice president Chris Wood said: "There's no mass panic that we saw in the 1980s and 1990s. The market is catching its breath. It has a sniffle, rather than influenza."
But Howard Archer, chief UK and European economist at Global Insight, claimed the credit crunch has meant there is a "markedly increased danger" over the property market.
He added: "Current rapidly deteriorating sentiment over the housing market also heightens the risk that house prices could fall more sharply over the next couple of years.
"Indeed, there is now a very real danger that a drop of more than 20 per cent in house prices could occur over the next couple of years."
Ups and Downs
House prices rises and falls over the past quarter.
North: 1.2 per cent
Yorkshire & the Humber: - 0.5 per cent
North West: - 0.5 per cent
East Midlands: 2.2 per cent
West Midlands: - 5.0 per cent
East Anglia: 1.4 per cent
South West: - 2.6 per cent
South East: 0.0 per cent
Greater London: 1.6 per cent
Wales: - 4.7 per cent
Scotland: 0.2 per cent
Northern Ireland: -1.5 per cent
UK: -1.0 per cent
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Saturday 11 February 2012
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