UNITED Kingdom house prices have fallen in June by the most since the end of the last recession as banks starved the property market of loans, according to the Nationwide Building Society.
The price of an average home declined 6.3 percent from a year earlier to 172,415 pounds (US$344,121), the biggest drop since November 1992, Britain's fourth-biggest mortgage lender said yesterday in a statement obtained by Bloomberg News.
Real estate stocks had their worst performance in more than 20 years in the second quarter and Bank of England Governor Mervyn King predicts "extremely weak activity" in the housing market.
Mortgage approvals fell to the lowest in at least nine years in May and consumer confidence deteriorated to the lowest level in 18 years last month, reports showed on Monday.
"I can't see this price decline coming to an end any time soon," said George Buckley, an economist at Deutsche Bank AG in London who predicts values may fall at least 10 percent this year.
"The biggest driver in prices tends to be approvals and yesterday's figure was quite shocking."
House prices fell for the eighth consecutive month, according to Nationwide. The pace of decline on the month was slower than the 2.5-percent drop in May, the most since Nationwide's index started in January, 1991.
Northern Ireland led declines on the year, while Scotland recorded the only annual gain, Nationwide said.
Property stocks extended their slide yesterday. Taylor Wimpey Plc, the UK's largest home builder, declined 4 percent and UK building-material distributor Travis Perkins Plc, which has lost almost 60 percent of its value this year, fell 3.5 percent.
Falling house prices risk pushing the UK economy into recession, as slowing growth and falling confidence curbs Britons' spending. King said on June 19 that "lower demand in the high street will go hand in hand with lower demand in the property market."
Banks granted 42,000 loans for house purchases in May, compared with 57,000 in April, BOE data showed on Monday.
An index of consumer confidence fell to minus 34 in June, the lowest since the London riots in 1990 before Margaret Thatcher's demise as prime minister.
"The tightening of credit conditions over previous months, along with changing expectations of house price growth and a general weakening in consumer confidence in the economy have hit mortgage demand and led to a severe slowing in the levels of housing market activity," said Fionnuala Earley, Nationwide's chief economist.
King told law makers last Thursday there may be "big movements" in house prices as the property market goes through an adjustment period.
The BOE predicted in May that the annual rate of economic expansion would drop to about 1 percent, the lowest since 1992. Still, accelerating inflation makes it harder for central-bank policy makers to kick-start economic growth by cutting rates.