Plummeting House Prices in the UK

The latest UK property reports confirm the downward trend in UK house prices, the first drop since 1996. Figures show an average 1% cut on home prices in 2008 as compared to 2007. Further slowing down of the UK housing market is feared because of the credit crunch crisis. The average home in the UK, which cost £180,314 twelve months ago, is now available at £178,555. So it’s now clear that the price boom bubble that inflated wildly since 1996 has finally burst.

While the government views the rapidly slowing housing market as a “gentle correction” of property prices, David Blanchflower of Bank of England predicts the house prices to fall by a third over the next few years unless interest rates are cut. On the other hand, economist Ed Stansfield predicts a huge 20% fall by the end of 2009. But some others argue that homes are still worth considerable, even more than they were in 2006. According to them, the UK housing market has seen huge price leaps in the past years that the present 1% drop seems merely insignificant and doesn’t appear to pose any threat to the market.

Ed Stansfield replies in ‘yes’ when asked if property prices are heading for slump. He adds, “We have long warned that the housing market boom would end with a major correction - which now seems to be unfolding.” But Rosalind Renshaw, a property market expert, answers the same question in a confident ‘no’. He says that the drop is always a good news for the first-time buyers and those wanting to move up the housing ladder. Falling prices are generally associated with negative equity but according to Renshaw, “A one per cent annual fall does not signal a return to the bad old days of the early 1990s.”