Average house cost 'set to fall'
Updated on 28 January 2008
The average cost of a home looks set to fall by £11,000 from its peak, with prices during 2008 suffering their first annual drop since 1995, an economics consultancy has warned.
The Centre for Economics and Business Research (CEBR) said a combination of the credit crunch, the recent house price boom and stretched household finances would leave house prices 4.2% lower in the final quarter of 2008 than in the final three months of 2007 at an average of £187,900.
It said house prices would also end the final quarter of 2008 around £11,000 below the peak of £198,900 they reached during the third quarter of 2007, with the average value of a home dropping by more than £8,000 in 2008.
The prediction comes after property website Hometrack said house prices fell for the fourth month in a row during January as buyers continued to stay away from the market.
The group said the average cost of a home in England and Wales fell by 0.3% to £174,700 during the month, while the annual rate of growth also continued to fall, easing to just 2.3% in January, the lowest level since June 2006.
At the same time the number of new buyers registering with estate agents continued to fall, dropping by 11.5% during the month, following falls of 7.9% and 9.1% in December and November respectively.
There was also a shortage of homes coming on to the market, with 4.6% fewer properties put up for sale than during the previous month, causing levels to be 10% lower than six months ago.
Richard Donnell, Hometrack's director of research, said: "Weak confidence among would-be purchasers continues to put downward pressure on house prices although the scale of the recent falls is relatively small when put in the context of gains over the last few years.
"Underlying prices are still being supported by a continued tightening in the supply of homes for sale, a trend that is likely to continue.
"The short-term outlook for market activity hinges as much around the outlook for UK interest rates as it does the outlook for financial markets."
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