UK house price falls among steepest in the world

UK house price falls among steepest in the world

Thursday, 5 March 2009

The credit crunch has triggered property price falls in nearly every housing market across the world, with the UK seeing some of the steepest drops, research showed today.


Around 81% of countries recorded falls in the value of property in the final quarter of last year, compared with just 27% in 2007, according to estate agents Knight Frank.

The group said it was now clear no market would escape unscathed from the global financial crisis, although the impact would vary according to the housing markets and underlying economies of individual countries.

The UK recorded the second steepest annual price declines out of the 42 countries Knight Frank looked at.

House prices fell by 14.7% in the UK during 2008, with 5.1% of the slide coming during the final quarter of the year.

The group said not all markets were at the same point in the cycle, with 19% of the countries it looked at still seeing price rises in the final three months of 2008.

But it added that although house prices rose by more than 10% last year in seven countries, values had now started to fall in six of them.

Dubai was the strongest performer during 2008, with house prices soaring by nearly 60% during the year, but much of this gain is expected to be wiped out in 2009.

At the other end of the scale, Latvia saw the steepest price slides on both an annual and quarterly basis, with homes dropping by 16% in the final three months of the year and plummeting by 33.5% during the whole of 2008.

Iceland also suffered badly, with prices falling by 14% during the year, with 11.3% of the slide coming in the final quarter following the collapse of its banking sector.

The United States and Ireland were both also near the top of the fallers' table with annual price drops of 12.1% and 9.1% respectively.

Nicholas Barnes, head of international residential research at Knight Frank, said: "The current downturn is unlike any other we have ever witnessed in both scale and causes.

"This year is likely to be more difficult than 2008, however, there is a 'consensus of hope' that the trough of the current cycle will be reached in 2009, although a bounce-back is not anticipated and the current fragility of markets could be exposed by further bad news from the financial sector or indeed the underlying economies.

"At some point, however, buyers will decide that price falls in many markets represent once-in-a-generation opportunities that are too good to pass up."

The Royal Institution of Chartered Surveyors also released research today showing the impact of the global economic problems on European housing markets.

It said the Baltic States had seen the sharpest falls during 2008, with Estonia recording a 23% slide, closely followed by the UK with drops of 16% and Ireland with falls of 9%.

It said even countries which did not experience a house price boom, such as Germany and Austria, had been hit by the credit crunch.

RICS said official house price indices in Spain surprisingly recorded only moderate price falls, but the current credit squeeze and the end of the consumer boom are expected to lead to a more material readjustment in 2009, particularly in the second homes sector.

Simon Rubinsohn, chief economist at RICS, said: "Ensuring a ready flow of mortgage finance needs to be an important priority for European governments but the key to providing support for property markets across the region is effective measures to underpin the economy."