Britain’s biggest building society today said house prices fell by a record 15.9 per cent during 2008 as it warned the property market was in for another turbulent year.
Nationwide said prices were likely to have further to fall before significant numbers of buyers returned to the market, although it stopped short of making a specific forecast for price drops in 2009.
The group said the average cost of a UK home fell by a further 2.5 per cent in December, dashing hopes that November's 0.4 per cent slide marked a stabilisation in the rate at which prices were dropping.
The fall during 2008, which is the biggest since the group began collecting data in this format in 1991, left the average house price at £153,048 - wiping out all gains seen since the spring of 2005 and leaving homes costing £20,000 less than in December last year.
Nationwide'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.
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.
"Conditions remain highly volatile going into 2009, making it more difficult than usual to arrive at a specific forecast for house prices."
The housing market is being strangled by the credit crunch, with the mortgage drought exacerbating already stretched affordability.
One in four mortgages now requires a deposit of at least 40 per cent, while 60 per cent of mortgages are only available to people looking to borrow 75 per cent of their home's value or less.
The high deposits being demanded by lenders are making it difficult for people to buy their first home or trade up the ladder, while the higher rates charged to borrowers who do not have a sizeable deposit are off-setting the improvements in affordability caused by house price falls.
The number of mortgages approved for house purchase sunk to a new record low of just 27,000 during November, according to figures from the Bank of England, while housing transactions are running at less than half the levels seen during 2007.
Seema Shah, property economist at Capital Economics, said: "This year, house price falls are set to be at least as large as in 2008.
"The continued tightening in lending criteria, the likely depth of the economic recession and the resulting sharp increase in unemployment, all suggest that this housing market correction is far from over."
She added that Capital Economics expects house prices to fall by 20 per cent during 2009.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "2009 looks certain to see another sharp drop in house prices as the fundamentals remain largely unfavourable.
"The ongoing deep problems of the housing market maintains pressure on the Bank of England to deliver another deep interest rate cut on Thursday, although mortgage lenders are likely to be increasingly unwilling to pass on much of any further interest rate cuts."
The Bank's Monetary Policy Committee is widely expected to cut interest rates by at least another 0.5 per cent on Thursday, with some economists pencilling in a reduction of 1 per cent.
PA