House prices in the UK suffered their biggest annual fall in 15 years last month, data from HBOS showed yesterday, raising fears of deep downturn this year.
The weak figures come after a Bank of England (BOE) policymaker warned house prices could fall by more than 30 per cent and add to the woes of Prime Minister Gordon Brown, whose Labour party has suffered heavy losses in local government elections.
"This is a dark cloud that is getting ever darker for the economy," said Alan Clarke, an economist at BNP Paribas.
House prices fell 1.3 per cent on the month to £189,027 last month, the third monthly decline in a row, leaving prices 3.7 per cent lower than April last year.
That was the biggest annual fall since June 1993, analysts said. HBOS said prices in the three months to April were 0.9 per cent lower than a year ago - the weakest reading since 1996.
Sterling fell immediately after the figures as concerns grow that the housing market was poised to weaken sharply as lenders toughen up their mortgage terms and the economy slows.
"We expect house prices to fall by seven per cent and nine per cent next year," said Howard Archer, economist at Global Insight.
That will add to pressure on the Bank of England to take a more aggressive approach to lowering official borrowing costs.
BoE arch dove David Blanchflower said this week Britain's economy could fall into a recession and house prices dive unless policymakers acted immediately to shore up growth. Most analysts expect the central bank to cut rates again next month after have already reduced borrowing costs three times since December.
The Nationwide building society reported the first annual decline in house prices in 12 years in April and a record high proportion of surveyors are reporting falling house prices across the country.
Last month, Halifax reported house prices falling 2.5 per cent on the year, the fastest monthly rate of decline since 1992.
While the housing downturn is gathering pace, prices have nearly trebled in the last decade and analysts said record levels of employment suggest the market is not about to crash like it did in the early 1990s.
"We think the unemployment rate is only going to rise by half a percentage points compared to over three percentage points in the early 1990s which forced people to sell their homes," said BNP's Mr Clarke.
"Until now it has been a fall in demand. We haven't seen a tidal wave of people trying to sell yet."