Estate agents report that up to 40% of property transactions are falling through.

UK house prices have fallen at the highest rate since the Nationwide first began recording property prices in 1991, the building society has announced.

The annual decline now stands at 8.1%, fuelled by a 1.7% fall in prices in July. This means the average UK home is now worth £169,316 – almost a £15,000 decline year-on-year and the lowest level since August 2006.

House purchase transactions amounted to 36,000 in June – just a third of the amount recorded for the same period in 2007. Estate agents have also reported that up to 40% of property transactions are falling through and the average number of sales per surveyor is at its lowest ever level.

According to Nationwide, despite the fact house prices have fallen for nine consecutive months, they are still £11,000 higher than three years ago.

The building society also reported falling retail sales for June, confirming it said: “the view that consumers are tightening their belts.” In addition, unemployment levels for the month were up – increasing for the fifth consecutive month to 840,000. The figure is 2.7% lower than the year previous however.

Nationwide further attributes falling prices to “difficulties with credit availability”, particularly at the higher end of the loan-to-value range (LTV).

According to Fionnuala Earley, Nationwide’s Chief Economist, a reduction in the cost of mortgages could restore some liquidity to the housing market.

She said: “This is not likely to happen overnight [however]. Overall the weakening economy and poor housing market sentiment do not suggest that the market will recover quickly. But, if oil prices continue to fall and the Monetary Policy Committee is satisfied that its inflation credentials are intact, the possibility of earlier rapid cuts in interest rates increases, which would be good news for borrowers.”

To read the Nationwide’s report in full, visit www.nationwide.co.uk/hpi

By Natasha Piscitelli