According to recently released figures from the Nationwide Building Society house prices in the UK are continuing to plummet, and the building society has now recorded its worst monthly fall since it began taking records seventeen years ago in 1991. The resulted indicate that the housing market is heading for the worst crisis since the dark days of the 1990s, when house prices crashed. According to Nationwide house prices fell by a massive 2.5% in May.
This latest drop ion house prices has also resulted in the lowest annual decline since the early 1990s, with house prices now 4.4% lower than they were this time last year. Between April and May the average house price in the UK fell by around £5000 according to figures. However, whilst prices are now lower than they were this time last year they are still 5% higher than they were two years ago and 10% higher than they were three years ago.
One economist stated: ‘The plunge in house prices in May is a real shock, and will fuel concern that we are now headed for a sharp correction. The downward pressure on house prices coming from stretched buyer affordability and tight lending conditions is increasingly biting. It now looks more likely than not that house prices will suffer double-digit falls both this year and in 2009.’
He added: ‘Clearly, a sharp housing-market correction would add to the already serious risks to economic growth, particularly through weighing down on consumer spending.’ An official from Nationwide said: ‘Falling house prices combined with higher inflation make the MPC’s decision more difficult. Stronger-than-expected inflation appears to have shattered hopes of an early cut in the Bank rate in June, but more downbeat economic and housing-market data could lead more MPC members to vote for pre-emptive cuts.’
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