House prices fall to two-and-a-half-year low

In what will come as a further blow to homeowners’ confidence, a survey released today shows that the average house price in the UK has now dropped to levels last seen more than two and a half years ago, with prices down 7.3 per cent on this time last year.

Hometrack, which monitors the UK housing market, says that the fall in house prices increased faster in October, than in either August or September, adding that the supply of new homes coming to the market has also dried up. “Weak consumer confidence continues to undermine demand for housing with a 35 per cent fall in the number of applicants registering with agents over the last six months. The survey shows that nearly three quarters of the country saw price falls over October with the largest declines on a regional basis over the last 12 months seen in London and the South West,” says Richard Donnell, Hometrack’s director of research.

Despite the gloom, the number of deals being completed in October was up 5.4 per cent, which Mr Donnell argues is because sellers are becoming more realistic about they what they can commend for their homes. “This is not a shifting of sentiment. People are still nervous and also having trouble getting mortgages, but it the first time for a while that the number of transactions has increased.” There is also further evidence, according to Mr Donnell, of gazundering, a practice whereby buyers reduce their original offer after recognising that the property market has fallen. The Asking prices down.

Despite the depressing headline figures there were some chinks of light. House prices in the North West and North East of England, and in some parts of Wales, the fall in prices has been less dramatic compared to London and the South East. The value of homes in parts of the capital was rising by more than 20 per cent until the start of 2007, says Mr Donnell and so the changing economic situation has had a comparatively bigger impact. London house prices are down 8.6 per cent on a year on year basis.