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UK: House prices falling at fastest rate since the 1990s

The decline in the housing market accelerated this month with prices falling at their fastest rate since the recession of the early 1990s – reports The Guardian.

Nationwide reported this morning that UK house prices fell by 2.5% in May compared with April – the biggest month-on-month decline since the building society started tracking the market in 1991. At £173,583 ($341,959 €219,441), the average home is worth 4.4% less, than in May 2007 – the biggest annual drop since December 1992.

House prices have now been falling for the last seven months, but analysts were startled by the extent of the downturn over the last few weeks. “The 2.5% plunge in house prices in May reported by Nationwide is a real shock and will fuel concern that we are now headed for a sharp correction in house prices,” warned Howard Archer of Global Insight. Archer believes that prices will fall by 7% this year and 9% in 2009. “Mortgage approvals for house purchases remain at historically low levels, agreed sales are falling, buyer interest is continuing to decline, it is taking longer to sell a house and sellers are achieving a falling percentage of their asking price,” he argued.

Fionnuala Earley, Nationwide’s chief economist, said that tighter lending conditions, following the credit crunch, was making it harder for potential buyers to get a mortgage. Recent negative weak economic news added to the “gathering momentum of negative sentiment about the housing market”, she added. The long housing boom that began in the mid-1990s means that house prices are still 5% higher than two years ago, and 10% higher than May 2005. The Guardian)