Nationwide’s latest figures, out today, reveal that house prices plunged by another 2.5% in December. At the end of the month, the average house was worth £153,048, which is 15.9% (about £20,000) less than a year earlier – the biggest annual drop since the building society started its index in 1991. The figures will make uncomfortable reading for homeowners – particularly since Nationwide (along with almost every other market observer) is warning that there’s plenty more pain still to come in 2009...
When prices fell by a ‘mere’ 0.4% in November, some optimists were suggesting that the market could be bottoming out – or even that the Government’s stamp duty suspension was starting to have an effect. At first sight, the December figures seem to give the lie to that. On the other hand, December’s always a slow time for house sales, and the rate of decline over the last three months (which smoothes out some of the volatility) now stands at 4.2%, the lowest since May. So we can’t dismiss that idea entirely.
Still, Nationwide admitted today that it had been surprised by the extent of the deterioration in the housing market in 2008. ‘This time last year we expected the housing market to cool quickly as affordability was poor and economic conditions looked set to weaken, but we did not anticipate the speed of house price falls or the extent of the global and domestic economic slowdown,’ confessed its chief economist Fionnuala Earley. Not surprisingly, she’s keeping her cards close to her chest when it comes to 2009, arguing that the current situation is so volatile that it’s hard to make a specific forecast – although she thinks prices will have to fall further before buyers start returning to the market.
And with house prices still above the long-term average, despite this year’s precipitous falls, many analysts are predicting another 15% fall in 2009. With difficult economic times ahead, and many people facing uncertain job prospects, it's unlikely that buyers will start flooding back into the market - which makes further falls inevitable.
Then again, prices are still well above the levels of five years ago. And affordability is improving all the time - so if you're looking to get on the housing ladder some time soon, you may see this as excellent news. Although until mortgage availability improves (on Radio 4 this morning, one broker estimated that 75% of his products had been withdrawn in the last few months), you may find it difficult to take advantage...
In today's bulletin:
Debenhams and Next see sales fall - and their shares rise
House prices fell at record rate in 2008
FSA lifts controversial ban on shorts
Editor's blog: Down with detox
SMEs still surprisingly perky about 2009