U.K. House Prices to Decline 15%, Knight Frank Says

By Peter Woodifield

Oct. 15 (Bloomberg) -- U.K. house prices may fall another 15 percent by the end of 2009 following a similar drop in the past year as values slide back to 2003 levels, Knight Frank LLP said.

The slump will leave 5 million properties, or 24 percent of the private-housing market, with a lower value than the purchase price, the London-based real-estate broker said in an e-mailed statement today. Average prices won't recover to last year's peak until 2015.

``Our forecast suggests that we will be closing in on the bottom of the market during late 2009 or early 2010,'' Liam Bailey, head of residential research at Knight Frank, said in the statement. ``We are now at least halfway through the process of price falls, with around 15 percent of an estimated 30 percent peak-to-trough decline already factored into prices.''

Prices are dropping as the U.K. economy grows at a slower rate and banks grapple with the fallout from the credit crisis. Lenders approved 32,000 loans for house purchases in August, the least since comparable data began nine years ago, the Bank of England said Sept. 29.

Luxury Homes

The revival in prices will be led by luxury properties in central London, where values may get back to last year's peak by 2012, when the Olympics are being held in the U.K. capital. The recovery may take until 2019 in Northern Ireland, the broker said.

``The winners in this market will be anyone with equity who can buy over the next six months,'' said Bailey. ``Those requiring significant finance will be unlikely to be quick enough on their feet. Vulture funds and cash-rich individuals will be the first to benefit.''

The value of newly-built apartments and houses has fallen 50 percent or more in some regional cities, the broker said. ``It looks as if price declines are already coming to a close here.''

The price falls will be particularly welcomed by people who had given up hope of ever being able to buy their own home, said Knight Frank.

The biggest drop in property in values this year and next will be in Northern Ireland and Wales followed by London, said Knight Frank. The smallest declines will be in the north of England and Scotland, it said.

Development land values may slump 15 percent next year after plunging 33 percent from their peak already, said Knight Frank.

Agricultural land prices may drop 10 percent in 2009 after peaking this year.

Knight Frank is Europe's biggest closely held property broker by revenue.

To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.