House prices dip 10.5% in 12 months

1:23am Friday 29th August 2008

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Annual house price falls hit double digits during August for the first time in nearly two decades, figures showed.

The average UK property has lost 10.5% of its value during the past 12 months, the biggest drop since the final quarter of 1990, when the market was in the grips of the last house price crash, according to Nationwide Building Society.

Prices fell for the 10th month in a row during August as potential buyers continued to shun property in the face of the market downturn and the mortgage drought.

The rate at which values are sliding also accelerated during the month with prices falling by a further 1.9% in August following drops of 1.5% and 0.9% in July and June respectively.

The average property in the UK is now worth £164,654, after losing £19,244 of its value since August last year, with 10.3% wiped off prices since the beginning of 2008 alone.

The recent price falls are likely to have pushed many people who bought homes with deposits of only 10% or less between August last year and the beginning of 2008 into negative equity.

Liberal Democrat Treasury spokesman Vince Cable said it was likely around 300,000 people now owed more on their mortgage than their property was worth, and he warned that the figure could quadruple if price falls continued over the next year.

The latest housing market data received a gloomy reception from economists with many warning there was likely to be worse to come.

Jorg Radeke, an economist at the centre for economics and business research, said: "Today's figures defy hopes that the housing market is bottoming out any time soon."

Seema Shah, property economist at Capital Economics, said: "The sharp decline in house prices persisted into August as weak buyer confidence and tight lending criteria continued to weigh on the market. Unfortunately, with the economy set to contract over the next year, the outlook for the housing market remains bleak."