Nationwide: U.K. house prices down 16.6%
The monthly Nationwide Building Society survey is out for house prices in the U.K. The data show an annual fall that is the steepest on record at 16.6%. This means that house prices are now falling more rapidly than ever in the U.K. and that spells bad news as its economy has just entered recession. Combine these numbers with a massive fall in the value of the British Pound and you have a disastrous return for the many international investors busy in the U.K. property markets.
Nationwide had this to say about the data (the highlighting is mine):
“Levels of activity in the housing market have remained very low in recent months. Mortgage approvals for house purchase fell to a record low of 27,000 in November, and partial figures for December suggest there has only been a small improvement since then. House purchase approvals have historically been a good lead indicator of house price movements, and we would not expect to see a stabilisation of property prices until approvals recover significantly from current levels. In the past, approvals have tended to move in line with new buyer enquiries at estate agents. More recently, however, the relationship between buyer enquiries and approvals has broken down, with buyer enquiries recovering quite strongly in recent months while approvals have shown little sign of recovery.“
This quote would suggest that the further deterioration in the U.K. housing market has much to do with a lack of lending by under-capitalized and fearful U.K. banks. Obviously, banks do not lend when their capital base is compromised. Therefore, until Gordon Brown finds a solution that recapitalizes the U.K. banking sector, we should expect a continuation of this trend.
Nevertheless, you should note that the Nationwide data demonstrate that house prices are still much too high relative to income in the U.K. and have a considerable distance to fall before they hit the long-term trendline.
Early this month I predicted that the U.K. and Ireland would be countries with massive defaults in 2009 due to a very weak housing market. The U.K. data suggest that Britain is very much holding up its half of that equation.
New year sees little change to recent house price trend – Press release, Nationwide