The Nationwide Building Society recently published figures showing that in March 2008, house prices fell 0.6 per cent which follows on from a 0.5 per cent drop the previous month. This has caused many experts in the property field to take this as a sign that the UK property market is weakening fast. The pound has also fallen to an all-time low versus the Euro on the back of the weakening housing statistics, with British consumer morale at its lowest level in more than fifteen years. This data indicates that house prices are buckling under the substantial pressure from constraints on increased affordability and tighter lending conditions. The escalation of the credit crunch, with the sudden reduction in the availability of loans could mean that there is an increased risk that a significantly sharper housing market correction could occur. In late March 2008, three of Britain’s biggest mortgage lenders raised some home loan rates in response to tighter lending conditions stemming from the global financial turmoil. A number of property analysts now expect a modest fall in house prices throughout 2008, predicting an annual price drop after a decade in which the cost of the average home has trebled. At present, the average house price is 200,000 but is predicted to fall to as low as 160,000 by the end of 2009. The people who will be hit hardest by the falling prices are those that paid a fortune for their homes over the past couple of years. This has contributed largely to consumer morale in Britain being at its lowest in 15 years as households grow gloomy about the economic outlook - moreso now than at any other time since the downturn of the early 1990s. Experts on the property market suggest that the fall in prices isn’t necessarily a bad thing however, as there are just as many winners due to the decline in house prices as there are losers. People beginning their own property search, either now or in the next few months, for example, will find some very reasonable house prices. Furthermore, many argue that a moderate fall in house prices at this stage should help to ensure stability in the property market going forward. Economics analysts have encouraged people not to over-do the doom-and-gloom scenario, stating that since housing prices have trebled over the past decade, there’s still some ways to go before they drop to the point that we see the return of negative equity.
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