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The cost of the average home fell to a two-year low last November, following a drop of 8.6% over the previous 12 months, government figures showed today.
According to the communities and local government department the average UK house now costs £199,732, taking prices back to levels not seen since November 2006 when the typical house cost £199,238.
Property in Northern Ireland saw the greatest falls, with prices dropping by an average 16.2% over the 12 months to November. In Wales prices took a 10.1% dive, while in England they fell by 8.7%. Falls were at their most shallow in Scotland, where they dropped by 3.9%.
The depth of the drop in prices also increased quarter-on-quarter. There was a 4.4% drop in house prices in the quarter leading to November, compared with a 3.6% fall in the quarter ending in August. Average prices only topped the £200,000 mark in London, the east of England, the south-east and the south-west.
More recent figures showed the falls continued into December. Earlier this month Nationwide said prices dropped by 15.9% in the 12 months to December, while Halifax said prices fell by 16.2%.
Chaos in the market
The figures reiterate reports from the Royal Institution of Chartered Surveyors (Rics) out today. Rics said the last three months of 2008 had shown the weakest performance in the housing market for three decades. Estate agents sold an average of just 10.1 homes over the quarter.
Rics said the number of potential buyers inquiring about homes for sale had increased following the large cuts in interest rates implemented since October. However, a squeeze on lending criteria means would-be buyers are finding it difficult to secure a mortgage, meaning the rise in buyer interest has not yet turned into an increase in sales.
The number of completed property sales was down by 57% in December compared with the same month in 2007, Rics said. A spokesman called on the government to act to restore order to the "current chaos".
Other figures published by the Bank of England yesterday showed that the full benefits of recent interest rate cuts are still not being passed on to borrowers. Despite a 3.75 percentage point cut over the past year, the rate on a 75% tracker mortgage has only dropped by 1.25 percentage points.
Howard Archer, chief economist at IHS Global Insight, said he expected a further "hefty price fall" in 2009 as borrowers continued to struggle to find affordable mortgages and unemployment continued to rise.
"Even if government measures to get banks to step up their lending increasingly take effect, it will clearly take time for confidence to improve and mortgage lending to pick up significantly.
"These factors are likely to continue to outweigh the beneficial impact of lower mortgage rates resulting from the Bank of England slashing interest rates, particularly as many buyers with small deposits still face mortgage rates of over 6%, if they can actually get a mortgage."
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