UK house prices are falling at their fastest rate since the aftermath of the financial crisis, new data confirms this morning, as high interest rates cool the property sector.
Halifax, the UK’s largest lender, has reported that the average property price fell by 4.6% on an annual basis in August, down from the record highs seen last summer. That’s the largest year-on-year decrease in house prices since 2009.
The price of a typical UK home dropped to £279,569, down by about £14,000 over the last year, back to the level seen in early 2022. It leaves average prices about £40,000 above pre-pandemic levels. That’s a bigger fall than expected, with economists having predicted a 3.45% annual fall. On a monthly basis, the average house price fell by -1.9% in August, the largest monthly fall since November 2022.
Halifax reports that southern England and Wales are seeing most downward pressure on property prices, with Scotland showing greater resilience. in the south-east of England, where a 5% fall in the last year has pulled the average house price down to £379,565. In the north, prices have proved more resilient.
Estate agents report that potential buyers are negotiating house prices down. Nathan Emerson, CEO of Propertymark, reports that more houses are selling below their asking price: “House prices are thankfully adjusting to more sensible levels alongside increases to people’s earnings and the number of properties selling below asking price is increasing, offering homebuyers the opportunity to negotiate. These factors are all playing a part in increasing homebuyers’ affordability and softening the blow of rising interest rates.
“However, despite how this may look on the face of things, sellers are rightly still motivated to sell as they continue to make a healthy gain on their property price.”
Matt Thompson, head of sales at Chestertons, says "property buyers are adopting a more strategic and flexible property search by adjusting their budget or widening their search criteria to find a suitable home."
Jeremy Leaf, a north London estate agent, warns that sellers who don’t accept price reductions may not get a deal: “The penny has dropped for the majority of sellers who are recognising that they may not achieve what they originally anticipated. As many sellers are also buyers, they realise that although they may have to accept less than they initially wanted for their property, they will also pay less for their next home which is significant as many will be trading up. Those sellers who refuse to recognise prices are softening will remain on the market."
Rival lender Nationwide reported last week that UK house prices fell by 5.3% in August, the fastest annual drop in 14 years.
However, there are signs that UK borrowing costs could be close to their peak. Yesterday, Bank of England governor Andrew Bailey said interest rates are probably “near the top of the cycle”, and predicted there willl be a further “marked” drop in inflation this year.
But for now, higher rates are cooling the markets.
Kim Kinnaird, director at Halifax Mortgages, says: “It’s fair to say that house prices have proven more resilient than expected so far this year, despite higher interest rates weighing on buyer demand. However, there is always a lag-effect where rate increases are concerned, and we may now be seeing a greater impact from higher mortgage costs flowing through to house prices.
"The market will continue to rebalance until it finds an equilibrium where buyers are comfortable with mortgage costs in a higher range than seen over the previous 15 years."
Looking ahead, Halifax predicts “further downward pressure on property prices”.
The agenda
• 7am BST: Halifax house price index for August
• 10am BST: Eurozone Q2 GDP (second estimate)
• 1.30pm BST: US initial jobless claims
We’ll be tracking all the main events throughout the day ... |
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