UNITED Kingdom house prices have fallen by the most in at least seven years in October, led by London, and will keep declining as the economy deteriorates, according to Hometrack Ltd.
The average cost of a residential property in England and Wales slipped 7.3 percent from a year earlier to 163,200 pounds (US$253,000), the London-based research company said in a statement yesterday obtained by Bloomberg News.
That's the biggest annual drop since the index started in 2001. Prices fell 1.3 percent from September.
The seizure in credit markets has made banks reluctant to lend, and the aftershocks are being felt across the economy. Unemployment is climbing and Britain faces its first recession since 1991, threatening to deepen the property slump.
"The expectation of a forthcoming recession and rising unemployment will further undermine demand for housing," said Richard Donnell, director of research at Hometrack. "Continued price falls are inevitable."
The pound fell against the United States dollar to the lowest since 2002 yesterday, its seventh consecutive drop, and traded at US$1.5428 as of 8:31am in London.
UK house prices would decline by 25 percent by the end of next year from the peak in the third quarter of 2007, the Centre for Economics and Business Research said in a separate report yesterday. That would put prices back at 2004 levels.
Property values were now at the same level as in March 2006, Hometrack said. The percentage of the asking price being achieved in a sale dropped to a record low of 89.2 percent from 90 percent in September.
In London, prices fell 1.6 percent from a month earlier, the biggest drop among the regions surveyed. Prices fell the least in Yorkshire and Humberside in northern England.
The UK economy contracted 0.5 percent in the third quarter from the previous three months, the statistics office said. Unemployment claims reached the highest in almost two years in September.
Ninety-eight percent of company finance directors predict the economy will stagnate or contract for at least two years, according to a survey of 100 firms taken from September 29 to October 10 by accountancy firm Baker Tilly published yesterday. That's up from 33 percent in a survey six months ago.
Mortgage approvals in the UK probably held at the lowest since at least 1999, according to the median of 26 forecasts in a Bloomberg News survey. The Bank of England releases that data tomorrow.
The UK central bank cut the main interest rate by a half-point to 4.5 percent on October 8 in a joint emergency action with the United States Federal Reserve and the European Central Bank.