House Prices Falling
House Prices: UK house prices fell at the fastest annual rate in almost two decades in August after restricted mortgage lending and recession fears put off home buyers, the Nationwide Building Society said today.
House Prices: The UK average house price fell 1.9 per cent which represents the 10th monthly decline and the biggest plunge since the fourth quarter of 1990. Fionnuala Earley, Nationwide's Chief Economist, said,
“The price of a typical house fell by 1.9% in August, bringing the annual fall into double digits for the first time since the fourth quarter of 1990. The price of a typical house fell by 10.5% over the last twelve months to £164,654. While the pace of monthly falls picked up during the month, the less volatile three month on three month measure, eased very slightly in August to 4.5% from 4.6% in July.”
Commenting on the impact of business confidence, Robin Fieth, the ICAEW's Executive Director of Operations and Finance, said,
“The survey paints a stark picture of the challenging business environment that has merged in the UK over the past year, with the economy facing its most difficult period since the early 1990s. This is now compounded by high and uncertain oil and commodity prices creating inflationary pressures and fall out from the UK housing market downturn which has continued to gather pace. At the same time we are seeing a new realism among businesses about the need to weather the current economic conditions with projected staff and capital investment both significantly down on this time last year.”
“As an increased number of businesses express concern over late payment, effective cash flow management is now more essential than ever for those sectors with rising input costs, such as Manufacturing and Transport. Insurance sector fell further this quarter. Business and Financial Services have tended to drive UK economic growth in recent years. Low confidence in both and low actual quarter-on-quarter growth – latest GDP figures (Q2 2008) show quarter-on-quarter growth at just 0.1 – is a worrying sign for UK economic performance in the months ahead.”
“Confidence in the Construction and Property sectors have also fallen sharply as the housing downturn has gathered pace. In addition, sectors reliant on the previously buoyant UK consumer are also feeling under pressure. With increased inflation causing a squeeze on real disposable incomes, and the housing market slowdown impacting on consumer confidence – now at its lowest since the 1970s – Retail Wholesale and Hotels. Catering also register large falls in confidence.
“We expect the slowdown to be at its worst towards the end of 2008 and into early 2009. We also expect inflation to start falling back from early 2009, allowing the Bank of England room to cut interest rates throughout 2009. Nevertheless, overall the performance of UK plc through 2009 is likely to be the weakest growth since 1992 – when the economy grew by just 0.3 per cent. However, towards the end of 2009, providing wage inflation stays low, economic activity looks likely to pick up.”