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Property prices 'need to drop by a third'

By Jonathan Dawes, Thu 21 Aug 2008 - Published in Mortgages

House prices need to drop by 35 per cent in order to make property affordable for the average buyer, according to Firstrung.

Paul Holmes, chief executive officer at Firstrung, said even a 35 per cent reduction in prices would only reduce house prices to around the levels of 2003-04.

He stated this would still leave a number of first-time buyers struggling to obtain a big enough loan.

Mr Holmes said: "I have been a doom monger where house prices are concerned for some time, but my own belief is that market forces have run amok."

Research by Nationwide shows the average price of a home is £15,000 less than in July 2007.

There has been an 8.1 per cent drop in prices over the past year, the fastest decline since 1991 when Britain experienced a recession.

Elsewhere, a Royal Institution of Chartered Surveyors poll has revealed the average number of transactions per surveyor over the last three months is 15.3 – the lowest figure recorded since the survey began.