(Adds Carpetright comments)
By Matt Falloon
LONDON, July 1 (Reuters) - British house prices fell for an eighth straight month in June to stand more than 7 percent below the peak hit last year, a survey showed on Tuesday, boosting expectations that the once-booming market will crash.
The Nationwide building society said prices slipped 0.9 percent last month after a 2.5 percent drop in May which had been the sharpest fall since the series began in 1991. Prices were 6.3 percent down on the year, the biggest decline since December 1992.
House prices have been falling non-stop since peaking last October at an average 186,044 pounds. Economists say the outlook for the market is bleak due to tighter lending conditions, faltering demand and a slowing economy. Some are forecasting price falls of 15 to 20 percent this year.
“Plenty more downside (is) likely, not least given the dire mortgage approvals (data) released yesterday,” said Alan Clarke, UK economist at BNP Paribas. “There is virtually no light at the end of the tunnel for the housing market.”
Bank of England data on Monday showed mortgage providers approved the lowest number of new home loans on record — just 42,000 — because lenders in the grip of a global credit crunch have been forced to toughen up borrowing terms.
Concern is now growing that a sharp correction in the housing market will spread to consumer spending and the rest of the economy. Furniture and household goods retailers are already suffering, as are Britain’s homebuilders.
Carpetright CATVU.L chairman Philip Harris, a 50-year veteran of carpet selling, said after his company posted an 11 percent fall in annual profit that the coming year was set to be one of the most difficult he had seen.
“The tightening of credit conditions along with changing expectations of house price growth and a general weakening in consumer confidence in the economy have led to a severe slowing in housing market activity,” said Fionnuala Earley, Nationwide’s chief economist.
However, the BoE is unlikely to support the housing market by cutting interest rates in the near future from the current 5 percent because inflation is at its highest level in more than a decade.
“Indeed, it is very possible the BoE’s next move could be to raise interest rates, which could clearly be very bad news for the housing market,” said Howard Archer, economist at Global Insight.
Reporting by Matt Falloon; Editing by Ruth Pitchford