House prices slumped by 2.6% in November and according to Halifax, UK’s largest lender, the fall in prices had made homes more affordable to buyers than at any point in the past five years, with the average price now just 4.65 times average earnings, compared with a peak of 5.84 in July last year.
The rental demand in the UK commercial property market has also dropped and it seems the value will decrease more than half by the end of the decade. The capital values of commercial property market have fallen 25% since the onset of the credit crunch in June 2007 and steeper falls than in the recessions of the 1970s and early 1990s are expected. According to Royal Institution of Chartered Surveyors (RICS) the commercial property market will see a fall of at least 16% in capital values in 2009 and up to 10% in 2010.
According to the IPD all property index shows that capital values have already fallen 28% from their June 2007 peak. The Director General of the Council of Mortgage Lenders, Michael Coogan, suggested it might take as long as six years for the housing market to recover.
The House Builders Federation chief executive, Roger Humber states that due to the credit crunch the government’s plan to build three million new homes by 2020 would not be met.
Re. Office sector, its capital values are expected to drop by a further 30% – 35%, thus bringing the trough declines in excess of 60% at its highest. Due to redundancies and lay-offs spreading through banking, finance and insurance sectors, demand for office space has been los over the past year, undermining the rental levels.
Capital values in retail market also has been dropped by a further 25% to 30% and so is the warehouse market which has been effected with the downturn.