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  • Writer's pictureZiggurat Realestatecorp

‘More to come' as UK house prices fall to lowest for 20 months

House prices fell for a sixth month in a row in September but nevertheless held up better than expected. Average prices fell by 0.4 percent last month, according to Halifax, half the decline that economists had forecast.

A separate house price index this week from Nationwide, the rival high street mortgage lender, also defied experts’ predictions. On Halifax’s measure, house prices have fallen each month since April and are now 4.7 percent lower than they were at this time last year.

Not since August 2009, when the world was emerging from the financial crisis, has there been a bigger year-on-year fall. The average UK house price peaked at just over £292,000 in September last year but now stands at £278,600, back at where prices were at the beginning of last year.

The data also suggests that more declines are to come. There were 37.3 percent fewer mortgage approvals in August than in the same month last year, as well as 15.6 percent fewer transactions, and estate agents are downbeat about the outlook, according to the latest survey by the Royal Institution of Chartered Surveyors.

Kim Kinnaird, Halifax’s director of mortgages, said: “Many economists and financial markets predict that interest rates will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s 2 percent target.

Overall, these factors are likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year.”

Andrew Wishart, senior property economist at Capital Economics, the consultancy, also does not expect mortgage rates to fall much until next summer. “That will mean demand stays weak at the same time as the amount of homes up for sale is rising to more normal levels,” he said. “The result will be further house price declines, of 5 percent to 6 percent, on top of the 5 percent we have had already.”

Halifax’s data showed that house prices in every region had fallen in the past year. In southeast England, where homes typically are more expensive, prices have fallen fastest and are down 5.7 percent compared with this time a year ago.

In Northern Ireland, they have dropped by only 0.2 percent. Despite the declines already in house prices, Kinnaird noted Britain’s “house price resilience” in the face of what was the fastest monetary policy tightening cycle in recent history, with the Bank of England raising interest rates for 14 consecutive months.

Prices are now £14,000 below their peak a year ago but are 1 percent higher than when the Bank of England started increasing its interest rates in December 2021. Such was the extraordinary growth in the pandemic, fuelled by the lockdown-induced “race for space”, that Halifax’s average house price is still almost £40,000, or 16 percent, higher than it was in March 2020.

Source: The Times

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