House prices still falling fast

House prices fell another 2.6% in November, the Halifax says.

According to its latest survey, that increased the annual rate of house price falls to 14.9%, as against the 13.7% rate in the 12 months to October.

The Halifax said the average property in the UK was now valued at £163,605, a level last seen in July 2005.

Last week, the Nationwide building society said the pace of house price decline had eased off, with prices down 13.9% in the year to November.

But the Halifax figures suggest that house price falls are accelerating.

"The combination of high house prices in relation to earnings, constraints on householders' incomes and spending power, and the decline in the availability of mortgage finance since the summer of 2007 has curbed housing demand," said the Halifax's chief economist, Martin Ellis.

The mortgage lender calculates the annual rate of decline by comparing the average house price over the past three months with the average for the same three-month period the year before.

A straightforward monthly year-on-year comparison suggests that prices may have fallen even faster, by 16.1%, although the lender argues that this approach can be distorted by short-term price fluctuations.

Stabilising?

The Halifax's survey suggests that the average house price has now dropped by £31,485 in the past 12 months.

Mr Ellis said there were indications that sales, if not prices, had bottomed out.

"The number of mortgages approved to finance house purchase was broadly unchanged for the fourth successive month in October at a seasonally adjusted 32,000," he said.

"The recent flattening off in approvals suggests that housing market activity may be stabilising."

However, there are widespread fears that the current rationing of mortgages will become even worse in the coming year, unless the government's efforts to overcome the crisis in the banking industry and to revive mortgage lending come to fruition.

The Council of Mortgage Lenders (CML), among others, has warned that new lending may be negative in 2009, for the first time on record.

That means that there could be so little new lending by banks and building societies that it would be outstripped by borrowers paying off their mortgages.

That in turn would means sales falling even further, putting further downward pressure on prices.

More price falls

The Halifax will be publishing its formal house price prediction for 2009 later this month.

"We have said we were comfortable with the consensus that prices would fall by about 20% over the course of 2008 and 2009," said Mr Ellis.

"But we do need to look at that again," he added.

Other commentators have already suggested that prices will continue to fall fast, with some suggesting they could drop by another 15-20%.

"The speed at which this housing market correction is unfolding, already the fastest on record by a country mile, is likely to step up a gear over the coming months," said Seema Shah at the consultancy Capital Economics.

"We think that we are only half way through this correction."