A two per cent fall in house prices last month, following one of 2.5 per cent in May has taken the value of the average British home down to £180,344 – back to where it was in August, 2006.
These findings from Halifax show the average price has now fallen by 8.7 per cent since June last year and by 9.8 per cent for the peak last August, just before the American sub-prime crisis destabilised financial markets.
Taking the latest three months together, the year-on-year decline in the Halifax measure is 6.1 per cent, close to the 6.3 per cent calculated by Nationwide.
Halifax’s chief economist, Martin Ellis, argued, as he has in earlier months, that the housing market is still supported by sound economic fundamentals.
“A strong labour market, low interest rates and a shortage of new houses underpin housing valuations,” he said. “Our research shows that the labour market is the key driver of the housing market. Employment is at a record high.”
The total number of people in work increased by 76,000 during the three months to April and by 446,000 to a record 29.55 million over the past year, he added.
Russell Jarvis, managing director of the Haart networks of estate agents, said “Our own real-time data shows that house prices are beginning to stabilise have dropped by 15 per cent already this year.
“These drops are creating opportunities in the market as previous price hikes were unsustainable. But the issue that still remains is financing.”
Michael Saunders, a Citigroup economist, pointed out that this years fall in house prices was steeper than at the worst point of the last housing market crisis in 1992.
“Given that the early 1990s was at that stage the biggest housing slide of the last 50 year, it is fair to say that we are now in the worst housing slide for 50 years,” he said.
Howard Archer, chief European and UK economist at the consultants Global Insight, described the Halifax findings as “very worrying”.
“There appears to be no let-up in the present downward spiral,” he said.
Global Insight is now forecasting that house prices will fall by 15 per cent during 2008 and then by another 12 per cent next year before flattening out in late 2010 some 30 per cent below their peak.