(RTTNews) - UK house prices declined for the ninth straight month to show a record fall in December. Outlook for 2009 remains subdued, but low supply would possibly assist in recovery, a report from Nationwide Building Society said Tuesday.

The latest monthly survey showed that annual fall in UK house prices was 15.9% compared to November’s 13.9% decrease. Economists had expected an annual fall of 14.7%. House prices dropped 2.5% in December from the prior month. In November, house prices were down 0.4%.

The price of a typical house stood at GBP 153,048, down from GBP 158,442 in the prior month. The factors that led to the sharp decline in prices in 2008 were credit conditions, expectations and affordability.

In the fourth quarter, house prices decreased 14.7% on a yearly basis, following a 10.3% fall in the prior quarter. Compared to the third quarter, house prices slid 4.4%, slower than the 4.8% decrease in the third quarter.

Scotland was the only region to show a positive growth in the fourth quarter from the prior quarter. London was the most expensive region, while least expensive place was North. Consumers expect further decreases in prices this year in all UK regions.

The Nationwide said outlook for 2009 is subdued, but low supply will play a part in recovery. Fionnuala Earley, Nationwide’s Chief Economist stated, “Conditions remain highly volatile going into 2009, making it more difficult than usual to arrive at a specific forecast for house prices. In these unsettled times a forecast subject to frequent change could itself add to greater uncertainty.”

Further, the Nationwide said the Bank of England would possibly cut rates in 2009 in an effort to prevent a deeper recession. It looks like 2009 will be a bumpy year for the UK economy, the Nationwide said.

The mortgage lenders noted that a great deal of uncertainty surrounds the matter of credit criteria and how much this is likely to continue to be an issue in 2009. As fall in house prices raises affordability and sharp decline in interest rates would provide more support. On market adjustment, property would begin to look cheaper and this would encourage more activity.

The Nationwide said “If the economy goes into a deeper recession we should expect to see a slower recovery in the cycle. However, if the economy recovers more swiftly, we may expect a faster turnaround in the housing market.” But, the short-term outlook for the housing market is fairly weak.

Sharp cuts in interest rates would support existing and potential homeowners and raise the affordability, which would eventually encourage buyers back into the market.

The Bank of England is widely expected to cut the benchmark interest rate further in January. Economists are expecting the central bank to lower the key interest rate by 50 basis points to 1.5% in its monetary policy meeting on January 8. In December, the central bank had slashed its interest rate by 100 basis points to 2%, the level last seen in October 1939.

On December 2, UK’s second- biggest mortgage lender, the Nationwide reportedly said it will not pass on any further BoE rate cuts to customers holding tracker loans.

In a separate communiqu�, the Nationwide said consumer sentiment moved to the lowest point on record in December as an economic slowdown paved way for higher unemployment. The consumer confidence index declined to a reading of 47 in December, the lowest in the four-year history of the survey.

Earlier, property consultant, Hometrack predicted further decrease next year amid fears of a prolonged recession. The Royal Institution of Chartered Surveyors had also forecast house prices to decline in 2009 on cautious mortgage lending.

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