Falling house prices are good news for potential first-time buyers, the Halifax review of housing affordability has stressed. There has been a big improvement in housing affordability over the last year.
House prices in the South East dropped by 3.2%, just in November. But on an annualised basis, the price falls in England have been most severe in the East Midlands and Eastern England, where the fall in values was over 14%.
Fewer transactions
There were also many fewer transactions in recent months, the Land Registry statistics show. The most up-to-date figures for the numbers of completed sales covers September, when there were just 38,508 purchases - compared with 98,075 a year before. This represents a stark 61% fall in sales.
The most expensive region remains the South East, where the average property price is still £197,960, even after the latest reductions. The least expensive region is the North East, where average prices fell by 10.3% to £115,445.
A consistent picture
The Land Registry's figures confirm the trends demonstrated by the mortgage lenders. Halifax reported house price falls of 2.2% in December and a 5.2% fall during the last quarter of 2008. Prices across the UK were 16.2% down on those of a year before, according to the Halifax statistics.
Martin Ellis, Halifax's chief economist, says: "There was a 2.2% decline in average UK house prices in December. Continuing pressures on incomes and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are expected to exert further downward pressure on the market over the coming months.
"But a number of factors will help to support demand and should help to limit the downturn. Improving housing affordability and an easing in the pressure on the majority of households' finances should support market activity and prices. The house price-to-earnings ratio - a key affordability measure - is at its lowest for five and a half years."
Biggest UK falls in Northern Ireland
There was further confirmation of the price falls in the latest statistics from the largest building society, the Nationwide. These reveal a 14.7% fall in average prices in the last year, with a 4.4% drop in the last quarter of 2008 - a slight reduction in the rate of decline compared to the previous quarter.
Northern Ireland has had the highest falls in property values, which fell by more than a third in a year. Yet in Scotland they dropped by less than a tenth.
Nationwide's chief economist, Fionnuala Earley, says: "2008 has been a difficult year for the housing market. In the final quarter of the year the average annual rate of house price fall in the UK was 14.7% - a stark contrast to the 6.9% increase recorded in the final quarter of 2007. However, this disguises some large differences across the countries and regions of the UK.
"In Scotland prices fell by only 8.1% in a year, whereas in Northern Ireland they fell by more than four times as much at 34.2%."
Bad news for construction
Despite the slight levelling-off in the rate of price falls, the picture remains bleak for the construction of new homes. The latest survey of construction activity produced by the Chartered Institute of Purchasing and Supply and researchers Markit revealed sharply falling activity across all parts of the construction industry, record declines in volumes of new work and very high rates of job losses in the industry.
Roy Ayliffe, director of professional practice at the Chartered Institute of Purchasing and Supply, confirms the picture is grim. "The New Year spirit was decidedly muted among UK constructors amid reports of ever toughening market conditions," he says. "Further falls in global demand resulted in the most severe retrenchment in the PMI's eleven-year history. Once again, the housing sector bore the brunt of the crisis as purchasing managers reported significant reductions in new business.
"Amidst a climate of doom and gloom, firms were forced to axe more jobs in preparation for what is set to be another year of trouble and turmoil."