House prices fall by £40,000 in four years as fears grow that slump will continue until 2015

Average home price is £160,395 - lowest since April 09

1.4 per cent drop is fastest in 18 months

Prices are 20 per cent less than 2007 peak

Experts predict 4.5 per cent fall this year

Around £40,000 has been wiped off the average value of a home in Britain over the last four years, research has revealed.

The fall has plunged many  homeowners into negative equity, the term used when the size of a mortgage is higher than the value of a property.

At its peak in August 2007, the average value of a home in Britain was about £200,000.

But the Halifax bank said yesterday that this figure has dropped to £160,000, a 20 per cent reduction.

A spokesman said the underlying trend of property prices was ‘modest  decline’ and blamed weak confidence among many workers following tax rises, high inflation, poor pay rises and public sector job insecurity.

A separate report, from the Royal Institution of Chartered Surveyors has highlighted the country’s two-speed housing market. 

It said property prices are falling across the country except in London, where they continue to rise.

Prices peaked in the north east, for example, at £130,000 in October 2007. The same house is currently worth about £101,000, a fall of 22 per cent.

In the same month, the average property in Kensington and Chelsea was worth about £835,000. It is now worth £876,550, a five per cent rise.

 

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The latest slide led to property values being 3.7 per cent lower during the three months to the end of April than during the same three months of the previous year - the biggest annual decline since October 2009.

Property values are now just  four per cent above the low they hit April 2009, while they are 20 per cent below the peak they reached in August 2007, before the credit crunch struck.

House prices have been highly volatile during the past year, dropping in seven months, rising in four and remaining unchanged in one month, as the market continues to be unsettled.

The quarter-on-quarter change, often seen as a smoother indicator of market trends, also pointed to an acceleration in the rate at which prices were falling.

Homes lost 1.2 per cent of their value during the three months to the end of April, double the 0.6 per cent drop recorded during the three months to the end of March, and the biggest quarterly fall since October last year.

But despite the gloomy figures, Halifax said it expected the rate at which house prices are falling to ease.

Halifax housing economist Martin Ellis said: 'Signs of a modest tightening in housing market conditions, a relatively low burden of servicing mortgage debt and an increase in the number of people in employment are all likely to be providing support for house prices, curbing the pace of decline.

'There are signs that house sales are stabilising, albeit at a level lower than the historical average.'

But Howard Archer, chief UK and European economist at IHS Global Insight, was less optimistic.

He said: 'We believe that house prices are likely to end up declining by some 10 per cent overall by the early months of 2012 from their peak levels in 2010. 

'This implies that they will fall by around 5 to 7 per cent more, depending on which measure you take.

'It is clear that critical to the development of house prices over the coming months will be the amount of houses coming on to the market, mortgage availability, how well the economy and jobs hold up as the fiscal squeeze increasingly kicks in, and what happens with interest rates.'

The figures contrast with those reported by Nationwide for the same month, which showed that house prices remained broadly unchanged, dropping by 0.2 per cent, leaving property values 1.3 per cent lower than in April 2010.

The fall came after warnings that house prices in Britain will fall for the next five years in the longest slump for at least half a century.

Property values in the UK are set to fall 4.5 per cent this year and 10.5 per cent by the end of 2015, according to the National Institute of Economic and Social Research.

The five-year slump in real terms – after inflation has been taken into account – is the longest period of decline since records began in the 1960s.

The group blamed the slide on weak consumer confidence in the face of economic uncertainty, which it said was constraining demand, putting downward pressure on prices