The average price of UK homes dropped from 0.4 percent to 157,600 pounds (US$249,000) compared with the previous week, according to a London-based property researcher. This was the biggest decline since March 2009 and the third consecutive monthly decline in the average home prices.
The decline in home prices adds to growing evidence that the UK housing market is weakening, as banks curb lending activity and the government is preparing for the biggest budget cut since World War II. Spencer Dale, chief economist at the Bank of England, said that home values may decline further.
Richard Donnell, director of research at Hometrack, said the price drops in September are “part of an ongoing re-pricing process which began six months ago in early spring, and which is set to stretch well into 2011.” He added that the “growing concerns over the economic outlook and public-spending cuts are weighing heavily on would-be purchasers.”
According to Hometrack, prices increased one percent in September compared to the previous year. Demand for homes, which measured by the change in new purchasers registering with property agents, fell 2.9 percent for a third month.
Hometrack said the increase in home supply for sale should slow and limit price declines by 2011.
“While demand is set to fall further in the coming months, we also expect the volume of new supply coming to the market to moderate,” said Donnell. “Talk of a double dip, with the implication being that the market will see double-digit house price falls, is overdone despite the weak outlook for demand.”