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May 29, 2008    

Nationwide HPI records property prices falling more quickly

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by Brian Turner
Nationwide HPI records property prices falling more quickly

The Nationwide’s House Price Index has revealed that house prices fell by 2.5% in May - the steepest fall in house prices since 1991.

It remains the seventh month in a row that house prices have fallen, bringing overall house price inflation to -4.4% across the UK for the past 12 months.

The resulting fall see average house prices now at £173,583, down £8,000 on a year ago.

Additionally, Nationwide’s chief economist, Fionnuala Earley, added that the fall in house prices is now accelerating.

The overall situation for the UK property market looks adverse:

1. Biggest fall in property prices since 1991
2. Longest falls in property prices since 1992
3. Lowest mortgage lending since 1993

The early 1990′s saw Britain enter recession, and the mimicry of property data to that period makes it difficult not to draw conclusions to the current economic conditions.

While a number of analysts have predicted that the UK will not see recession, it is increasingly difficult not to class such views as optimistic.

While Fionnuala Earley was keen to stress that Nationwide sees market conditions now as significantly different to the 1990′s housing crash, it’s difficult to be convinced by her arguments.

She argues that fewer homeowners bought at the top of the market in this cycle, and that deposits are typically larger.

However, by comparison to actual house prices and affordability, homeowners have been paying out far more and remain exposed to far higher debts.

A direct economic comparison by debt size could suggest that far, far worse is yet to come.

This is especially as restricted mortgage lending, the collapse of the buy-to-let market, retreat of the commercial property sector, and the likely sale of second homes and overseas property investments could all exacerbate current woes in the UK property market.

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