House prices fell 2.4% in May, according to the Halifax, providing further evidence that the UK housing boom is over.
Last week, Nationwide’s figures also indicated house price fall had accelerated to 2.4% in May, and even the Government has suggested prices may fall by 10% this year.
The Halifax figures put the average house price at £184,111, a fall of 3.8% since May 2007.
Prices have now fallen 7.8% since their peak of £199,600 in August 2007, according to Halifax, and have already fallen 6.7% since January.
The rapid acceleration in price falls may indicate that estimates of falls between 5% and 10%, made by the Council of Mortgage Lenders and Nationwide, may prove to be optimistic.
However, Martin Ellis, chief economist at Halifax, says these falls should be viewed in context of recent unsustainable gains in the market.
“House prices fell by 2.4% in May. Price falls should be measured against the significant gains in recent years. The average UK house price rose by more than £88,000, or 79%, between August 2002 and August 2007,” he says.
“The decline in prices is caused by the difficulties created for potential house purchasers by the rapid rise in house prices in the last few years, a squeeze on spending power and the reduction in credit availability.”
Halifax says price falls are primarily due to high fuel and food costs, which are putting strain on discretionary income available for house purchase. A decline in confidence is also important, with the number of interested buyers falling for the seventeenth consecutive month in April, the fastest decline since records began.
However, the news of falling house prices is unlikely to prompt the Bank of England to cut interest, with Governor Mervyn King having already stated that his job is not to support housing valuations, but to control inflation.
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