The average house price fell a further two per cent between May and June to £180,344, according to Halifax.
The Halifax House Price Index
found that in June house prices were more than six per cent lower than in June 2007, two per cent of which was lost last month, but they fell by even more in May, when the average price dropped 2.5 per cent.
Furthermore, the average house is still worth two per cent more than it was two years ago, more than 10 per cent higher than three years ago, and almost 40 per cent higher than five years ago.
Since the housing crash of the early 1990s, the average price of a house in the UK has risen 196 per cent, increasing for 48 consecutive quarters between 1995 and 2007 with just two exceptions, so they have a long way to fall and analysts do not think that the market will correct itself to the same extent that it did in the 90s.
While the employment market has slowed marginally since the credit crisis struck last summer, it is still high at 29.55million, and as Halifax concluded from its research that the labour market drives the housing market, so providing this remains relatively stable the housing sector will be supported accordingly.
The decline in value of British homes is determined by a fall in consumer spending power, which has been hit by the steep rise in house prices of recent years and the subsequent lack of affordability since the beginning of the credit crisis.
According to the Council of Mortgage Lenders, 300,000 first time buyers entered the property market in 2007, the lowest figure since 1980, and the changing market conditions mean that just five per cent of them took out a 100 per cent mortgage
last year compared to 35 per cent in 1990.
Consequently, housebuyers have been putting down bigger and bigger deposits, which became a necessity when 100 per cent loans almost died out completely earlier this year. The Bank of England has reported that 70 per cent of mortgage holders now have at least 50 per cent equity in their homes.
This means that fewer people who have bought their house since the market changed will be vulnerable to falling into negative equity, compared to the thousands of people – particularly those who borrowed 125 per cent of their home's value – who will struggle to keep up with payments when they come to the end of their fixed rate mortgage
deals and they owe more than their house is worth.
Martin Ellis, chief economist at Halifax, said that while house prices have declined by more than six per cent over the past year, "the average UK price remains slightly higher than two years' ago and is appreciably stronger than three or four years ago."
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