British real estate prices fell by 2.5% in May compared to April. These figures are given in a report published on May 29 by the British building society Nationwide. As reported by Lenta.ru citing The Guardian, this is the largest monthly drop in prices since 1991 – the start of record keeping.
Real estate prices have been falling for seven months, but analysts are stunned by the pace of the decline in the last few weeks. 'The 2.5% drop in May is a warning that a sharp correction in prices is imminent,' says Howard Archer of the British analytical group Global Insight. According to Archer's forecasts, prices will fall by 7% this year and by another 9% in 2009.
The average house price – about 174 thousand pounds sterling (about $342 thousand) – is 4.4% less than in May 2007. This is the most significant annual price adjustment since December 1992.
Nationwide economists see the reasons for the decline in the fact that the tightening of requirements for mortgage borrowers following the credit crisis makes loans less accessible to potential borrowers. 'Loan approvals are at historic lows, sales are falling, listing times are increasing, sellers are forced to make price concessions,' notes Howard Archer.
However, Nationwide believes that today's tightening of requirements for borrowers will bring positive results in the future. There will be fewer borrowers taking out long-term loans, meaning the market will become more predictable and stable.