Falling house prices rock shares

Shares in quoted housebuilders have plummeted on the latest housing data showing prices falling faster than at any time since 1991.

Housebuilder Taylor Wimpey was the biggest casualty, with shares dropping almost 7% today to 86.75p. However the firm was not alone, with all housebuilders falling by at least 2%.

Persimmon shares tumbled by 5.06% to 487.5p, with Barratt falling 2.37% to 195.75p. Barratt shares are now worth less than a fifth of their price a year ago, while Taylor Wimpey shares have similarly lost 81% of their value over the period.

The falls were prompted by data from the Nationwide building society showing the average price of a home has fallen 4.4% over the last 12 months. House prices are falling at their fastest rate since December 1992 according to the figures.

A 2.8% fall in May meant that average house prices fell 4.4% over the last 12 months to £173,683.

House prices have fallen for seventh consecutive months according to Nationwide, but the bank said that borrowers were in a better position to weather the housing slowdown than they were in the 1990s.

According to Fionnuala Earley, Nationwide’s chief economist, fewer homeowners bought at the top of the market in the current housing cycle and the deposits put down on new homes were much higher in the last housing boom.

She said: “A further fall in house prices in May was not unexpected, and for most of those not wishing to move house or borrow money secured on it, the fall in value of their home I likely to be of limited concern in the short term”.

However, other commentators said the data showed the housing market downturn would be deeper than previously thought. Seema Shah, property economist at Capital Economics, told the Guardian website: “The sheer size of the drop in house prices, without the economy having yet slowed significantly, suggests that this housing market correction will be deep and prolonged.”