Home sale prices drop 6.2%

Friday, 7 November 2008 1:23 PM

Average prices of completed property transactions fell 6.2 per cent in the last year.

The FT house price index for October shows a 1.2 per cent drop in sale prices from September - the eighth monthly fall in a row and the fourth consecutive drop over one per cent.

In London the property market is descending faster - with house prices dropping at 2.5 per cent - double last month's average.

According to the FT index - which lags behind the house price moves posted by Nationwide and Halifax - the average price of a home peaked in February of this year at £231,854, since when it has fallen by around 6.8 per cent or by £15,757 to £216,097.

This puts the average house price back to where it was in January 2007.

Peter Williams, chairman of Acadametrics, which compiles the index, said: "This is unlikely to cause problems for the vast majority of households but it will be a factor for those who cannot afford their loan repayments, and/or who have to sell and move home.

"With further price falls anticipated over the coming months and the reality of rising unemployment, we can expect to see growing problems created by negative equity."

He added that Bank of England estimates show a six per cent house price reduction well over half of borrowers still have loan to value ratios of less than 50 per cent and less than one in 20 borrowers would be in negative equity.

House price drops were most significant in Wales and the East Midlands - down 6.6 per cent.

"Looking at price trends in local authorities on a three month averaged basis, there are still significant variations across England and Wales," Dr Williams said.

"But there are now twenty-seven London boroughs and ninety-five districts where prices have fallen over the past year, and there is now only one London borough (Westminster) and no county or district with annual price inflation still in double figures."

Data this week from Halifax showed house prices dropped 13.7 per cent in the last year, while Nationwide last week reported a 14.6 per cent drop.

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