UK Landlord Forum / Life

Nationwide house prices fell 1.7 per cent last month to post their biggest annual drop since records began.

Prices sank for the 11th consecutive month and are now 12.4 per cent lower than a year ago, with the average property worth £167,797, the lowest since February 2006.

Fionnula Earley, Nationwide's chief economist, said September this year could hardly be more different from a year ago, with prices plummeting, fewer houses changing hands and first time buyers borrowing less.

She said: "Casting back one year there have been some astonishing and unpredictable developments in the housing and financial markets. "We would need to see a significant shift in consumers' sentiment before we begin to see any real recovery in activity and subsequently house prices."

This latest set of gloomy figures is likely to further fuel concerns about the state of the slowing British economy, hit as banks tighten lending amid the global financial crisis.

Howard Archer, an economist at Global Insight, said that house prices seemed poised to fall substantially further for an extended period as the fundamentals remain "pretty ugly".

He said: "Affordability ratios are still very stretched despite the double digit falls in house prices seen so far, while lending conditions are tightening even further due to the heightened financial market problems," he said. Adding that fewer mortgages are available and that lenders have raised their fixed rate mortgages in recent days.

Moreover, he said that even if, as expected, the Bank of England cuts interest rates as early as next week, it was likely to provide only very limited support to the housing market.

Subsequently Mr Archer said he had further revised down his house price forecasts to show a fall of 16 per cent this year and a further drop of 15 per cent in 2009.

As a result, he sees house prices falling 27 per cent from their October 2007 peak of £186,044 on the Nationwide measure to stand at £130,005 at the end of 2009.

Yeah, i've been hearing this story all morning on the BBC! Boooo!