Scottish house prices hit by eight per cent slump in year
The latest survey by the Nationwide building society found house prices across the UK dropped by 15.9 per cent during 2008, the biggest annual fall on record.
A regional breakdown showed Scotland had seen the least dramatic decline, with prices down 8.1 per cent down in the final quarter of the year compared with the same period of 2007.
Nationwide warned that prices were likely to have further to fall before significant numbers of buyers returned to the market as affordability measures still remained well above their long-run average.
The annual change, which was the biggest since the group began collecting data in this format in 1991, left the average UK house price at 153,048 – 20,000 less than in December last year and back down to levels seen in the spring of 2005.
Fionnuala Earley, Nationwide's chief economist, said: "2008 has been a year of turmoil in the UK housing market. The disruption in the financial markets worsened throughout 2008 and had larger implications for the real economy than we anticipated a year ago.
"This time last year we expected the housing market to cool quickly as affordability was poor and economic conditions looked set to weaken, but we did not anticipate the speed of house price falls or the extent of the global and domestic economic slowdown."
She added that conditions remained highly volatile going into 2009, making a specific forecast for the year difficult.
The group's figures are in line with statistics reported by Britain's biggest mortgage lender, Halifax, at the end of last week, which showed that house prices had fallen by 16.2 per cent during the final quarter of 2008 compared with the same period of 2007, after losing 2.2 per cent of their value in December.
Nationwide said demand from consumers was likely to be an important factor in 2009, with people unlikely to be upbeat about the prospects for house prices until the economy and labour markets stabilised.
Ms Earley said: "The short-term outlook for the housing market is fairly weak. This should not be surprising given the economic and labour market conditions we expect to face.
"Sharp cuts in interest rates will provide support to existing and potential homeowners and pave the way for the improvement in affordability which will eventually encourage buyers back."