Page last updated at 13:43 GMT, Thursday, 29 May 2008 14:43 UK

Expert reaction to house price survey

For Sale signs
A number of surveys have shown recent house price falls

The Nationwide Building Society says UK house prices have recorded their largest monthly fall since 1991, down by 2.5% during May.

The lender said prices were now 4.4% lower than a year ago, a drop of 8,000, which has taken the average UK house price down to 173,583.

Nationwide is continuing to forecast single-digit house price falls during 2008, although others are suggesting prices could drop by more than 10%.

Here is some of the reaction from experts to the survey.

SEEMA SHAH, CAPITAL ECONOMICS

The sheer size of the drop in house prices, without the economy having yet slowed significantly, suggests that this housing market correction will be deep and prolonged.

DEPARTMENT OF COMMUNITIES AND LOCAL GOVERNMENT

When looking at trends in the market, it is important to remember that UK house prices are 39% higher than five years ago.

The current issue affecting the market is fundamentally about the supply of credit - a very different situation to the early 1990s which was about high interest rates and unemployment.

HOWARD ARCHER, UK ECONOMIST AT GLOBAL INSIGHT

It now looks more likely than not that house prices will suffer double-digit falls both this year and in 2009.

PETER BOLTON KING, NATIONAL ASSOCIATION OF ESTATE AGENTS

The national sales figures do not tell the whole story. We know from our members that the picture is still very regional with some areas continuing to do better than others.

Indeed, our recent survey of agents records some stability returning to the market in the number of sales agreed, the number of viewings before a sale is secured and the average difference between asking and sales price.

The issue here is consumer confidence. It is apparent from our own survey results that some people are adopting a wait and see attitude, watching the market, before making any decisions, which is affecting prices.

There is no denying that the credit crunch and tighter economic factors have affected confidence in the market but it is still important to remember that the underlying factors that support the property market remain: low unemployment, historically low interest rates and a latent demand for houses.

ALLAN MONKS, JP MORGAN ECONOMIST

With lenders redesigning their products and mortgage provision moving back to some semblance of normality, it seems reasonable to assume that the pace of price declines will moderate as we move into the second half of the year.

LOUISE CUMING, MONEYSUPERMARKET.COM

This is further gloomy evidence that house prices are slipping and will undoubtedly not do anything to help the already low levels of confidence in the market.

The softening of house values will continue to hit the most vulnerable borrowers, those with little or no equity in their homes. As equity is eroded with falling values, these borrowers will find themselves paying more for their mortgages or, in the worst case scenario, find themselves with no borrowing solutions at all.

But with every cloud comes a silver lining for some and in this case, it is the first-time buyer who stands to gain. Today's news may encourage some to re-enter the market.

However, as there is an expectation of prices falling further, they may well play a longer waiting game to try to pounce at the bottom of the market - the longer they wait, the more stagnant the mortgage market becomes.

DAVID STUBBS, SENIOR ECONOMIST, ROYAL INSTITUTION OF CHARTERED SURVEYORS

The difficulties in the mortgage market are stretching accessibility and threaten to reduce transaction levels by 40% this year.

With buyers unable to secure financing on reasonable terms, some sellers are now choosing to cut prices. The market will only stabilise once transaction volumes recover.

The Government and the Bank of England should continue to implement measures to restore the smooth functioning of the mortgage market, before the drop in transactions and prices begins to really hurt the economy.


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