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29 November 2007

UK house prices see sharp tumble

November's fall in house prices is the largest since June 1995.
UK house prices saw their biggest fall in 12 years during November, mortgage lender Nationwide has said.
The firm's data showed that the cost of an average home slid by 0.8% from a month earlier - the first drop in price seen since February last year.

The annual rate of house price inflation now stands at 6.9%, down from 9.7% reported in October.

The data "confirms that the housing market is indeed cooling," Nationwide's chief economist Fionnuala Earley said.

"Poor affordability, weaker house price growth expectations and the effect of earlier increases in interest rates have all affected demand in the market," she added.

The 0.8% slide in prices seen in November is the biggest reported by the Nationwide since June 1995.

According to the building society's calculations, the cost of the average property in the UK is now £186,044, nearly £12,000 more than this time last year.

'Recession unlikely'

All indicators now suggest that house sales are going through a sharp downturn, while house price inflation is slowing quickly.

New mortgage approvals have slumped dramatically, according to the UK's biggest banks, while surveyors have a seen a continuing drop in enquiries from would-be buyers this year.

Even parts of the country that seemed immune from the general deflating of the market have now been affected.

This week, the Land Registry reported that house prices in England and Wales were rising at a rate of 8.1%.

Crucially, it suggested that prices in London, which until now had been shooting ahead of the national average, had started to slow as well.

However Ms Earley said an outright recession in the property market was unlikely.

"With interest rates on the way down and the continued issue of undersupply of housing in the UK market, the underlying fundamentals are perhaps more positive than the recent swings in sentiment might suggest," she said.

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