Property prices hit by record fall

FRESH evidence of the turmoil in the housing market emerged today as new figures showed prices down by eight per cent and repossessions soaring by nearly three quarters.

The official statistics also show that mortgage arrears are rising rapidly as the impact of increasing loan costs and higher unemployment continues to take its toll on homeowners.

The only bright spot for Londoners is that the fall in prices in the capital — which stands at six per cent over the past year — is lower than the national average, despite another 1.5 per cent drop in values last month.

That means that the average London house price recorded in today's Land Registry figures was £328,927 at the end of last month — just over £20,000 less than in the same month a year ago.

There will be concern that the national eight per cent drop in prices — which is the highest annual fall on record and double the year-on-year 4.6 per cent slide of the previous month — will further dent the economy by damaging consumer confidence and spending.

Although the Land Registry figure is lower than some quoted by lenders such as the Halifax and Nationwide, which reported declines of between 12 and 13 per cent last month, the reason is that today's statistic is based on completed sales and, therefore, tends to lag behind the actual state of the market. Howard Archer, chief economist of the City analysts Global Insight, said more gloomy news was likely in the housing market.

"The fundamentals continue to be largely stacked against the housing market, and it seems odds-on that prices will fall considerably further," he added.

The bleakest news today, however, came in separate statistics on repossessions issued by the Financial Services Authority which show that the number of houses seized by lenders has jumped by 71 per cent in the past 12 months. That took the tally of repossessions during the three-month period to the end of June to 11,054, while the number of homeowners who have been in arrears with their mortgage for at least three months has also risen by 16 per cent.

The new figures came only hours after a similarly downbeat assessment of the country's economic prospects by the Bank of England in its latest Financial Stability Report.

This warned that the toxic debt held by financial institutions in the UK had doubled during the past six months to £122.6 billion.