The leading building society Nationwide has recently warned that we should expect downward pressure on property prices in the UK over the coming year.

The warning came as the building society posted details of its profits, which have plunged by around 63 percent. Pre-tax profits for the building society were reported to be £117 million for the six months to September, and this compared to £322 million in the same period last year, reflecting a 63 percent drop.

According to reports the rock bottom base rate has resulted in a lower return on borrowing, which has affected the profits of the lender. In addition to this significant falls in commercial property values have also had a detrimental effect on profits, said the building society.

Graham Beale from the Nationwide said that 2010 was likely to bring continued challenges, and he expressed concern over the recovery of the property market in the UK.

Beale predicted that the current base interest rate, which has been at an all time low of just 0.5 percent for eight months, would remain at this level until at least the final quarter of next year.

He added that the recovery of the economy was likely to be slow and drawn out. Commenting on the recovery of the property market he said that house price increases seen recently had been the result of lack of supply, but that property values would be driven down next year due to rising unemployment and other factors.

He stated: ‘Economic recovery is forecast to be slow and we expect interest rates to remain at their current level until at least the fourth quarter of 2010. We are also cautious on future prospects for the housing market. The growth in house prices over recent months appears to be driven by lack of supply, and growth in unemployment throughout 2010 will inevitably exert downward pressure on house prices.’

Leave a comment