28
Nov
House prices fall but pace eases
ARTICLE FROM BBC NEWS WEBSITE FRIDAY 28TH NOVEMBER 2008 The slump
in house prices eased off in November with prices falling by just
0.4%, according to the Nationwide, the UK's largest building
society. The mortgage lender said the rate of price falls
'moderated significantly' when compared with October's 1.3% fall.
House prices are down 13.9% from November 2007, easing from a 14.6%
annual fall in October. However, Nationwide warned that the weak
economy would continue to put pressure on the housing market. 'In
spite of the moderation in house price falls recorded in November,
with the economy in recession, conditions do not appear very
favourable for a swift recovery in the housing market,'
Nationwide's chief economist Fionnuala Earley said. 'With prices
falling at their current rate, there is also less incentive for new
borrowers to hurry into the market.' The price of an average house
now stands at £158,442, the Nationwide said. That amounts to a
drop of £25,000 in the past year, although the building
society says prices are still £25,000 higher than they were in
November 2003. LENDING FEARS The past year has seen the UK property
market endure one of its biggest and most sudden slowdowns on
record. It is estimated that the UK house building industry has
shrunk by half since the start of the international credit crunch
in the summer of last year. Earlier this week the former head of
the HBOS mortgage bank, Sir James Crosby, recommended that the
government take direct action to stimulate the flow of mortgage
funds to the UK banking industry. He warned that otherwise new
mortgage lending might dwindle to a complete halt. And that in turn
would lead to a further downward spiral of sales and prices which
would make the impending economic recession even worse. In evidence
to a Parliamentary committee, Mervyn King, the governor of the Bank
of England, said no issue was more important at the moment than the
restoration of general bank lending. 'The government's massive
fiscal boost may prevent the downturn in economic activity being as
severe as would otherwise be the case but it will not prevent a
sharp jump in unemployment over the coming year,' said Simon
Rubinsohn of the Royal Institution of Chartered Surveyors (Rics).
'The real issue for the property market remains the collapse in
transactions rather than the necessary adjustment in prices,' he
added. FURTHER FALLS David Miles, chief UK economist at the
investment bank Morgan Stanley, said there had been some good news
in the past few weeks. 'We have had some very substantial cuts in
interest rates from the Bank of England,' he said. 'That will feed
through to lower costs of mortgages, for those who already have a
mortgage anyway, pretty soon,' he added. But the consultancy
Capital Economics said the Nationwide's figures were unlikely to
herald an upturn. 'November's moderate fall in house prices is not
a sign that the housing market is bottoming,' it said. 'With the
economy set for a deep recession and unemployment rising steeply,
we expect the sharper downward trend in house prices of recent
months to reassert itself,' it added. The gloomy outlook was
supported by the West Bromwich building society, the UK's seventh
largest. Reporting a 65% fall in half-year profits to £8m, it
forecast that house prices would fall further in 2009. Fearing that
some of its borrowers may start defaulting on their mortgages in
increasing numbers, the society set aside a further £7.5m to
cover potential bad debts, even though its arrears are currently
lower than the industry average.