Big fall in UK house prices

UK house prices have dropped by 2.5 per cent in May and are now 4.4 per cent lower than this time last year, according to Nationwide. The firm’s latest monthly survey shows the average price of a house is now £173,583, £8,000 less than May 2007.

May also saw the speed of the drop increase, with the slump now the longest consecutive period of monthly falls since 1990. Nationwide’s Chief Economist Fionnuala Earley attempted to offer some reassurance for owners, saying:

“A further fall in house prices in May was not unexpected, and for most of those not wishing to move house or borrow money secured on it, the fall in value of their home is likely to be of limited concern in the short term.

“Current market conditions inevitably lead to comparisons with the last episode of falling prices. However, there are a number of reasons to believe that today’s borrowers are better placed to weather the storm than in the 1990s.”

She added fewer homeowners have bought at the top of the market during the current cycle and pointed out today’s borrowers have typically put down a larger deposit than their 1980s counterparts.

Despite the falling numbers, house prices are still five per cent higher than in May 2006 and are 10 per cent higher than in May 2005. Earlier this month experts said many first-time buyers and new property investors were holding back on buying property to see what the market does next.