House prices fall at steepest rate in three years

Latest figures from Hometrack show that in December, UK house prices fell at their steepest rate in three years.

The decline has prompted the property website to warn that the market could seize up in 2008 and to predict that the number of property transactions will fall 17% during the year, while prices will rise an average 1%.

During December, the average cost of a home in England and Wales dropped 0.3% to £175,200.

Record levels of personal debt, higher interest rates and a loss of confidence in the housing market are all discouraging homebuyers, and earlier this month the Bank of England commented that the drop in house prices seemed “more pronounced” than expected.

According to Hometrack, the average selling time for a home rose to 8.3 weeks during December, the longest period since the survey of estate agents and surveyors began, in 2001.

Richard Donnell, director of research at Hometrack believes that “The second-half of the year has seen a major reversal in confidence” and he is expecting the number of property transactions to fall in the first-quarter of 2008, “because uncertainty among sellers about the health of the market will cause a major lack of homes for sale”.

However, Mr Donnell believes that “This will act as a support to prices, while also leading to greater price volatility in those markets where there is the greatest lack of supply.”

Citigroup, the world’s largest bank, is not so optimistic and predicts that a “toxic mix” of overvaluation, record debt levels and high mortgage costs will result in a further decline in UK house prices during 2008.

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