Rosalind Evans
A sharp 5.3% decrease is observed, correlating with a roughly 40% drop in sales completions in the first half of the year versus 2021.
August witnessed a 5.3% decline in UK house prices compared to the same time last year, marking the most rapid annual fall in over a decade, as detailed by the Nationwide Building Society.
This notable dip, the steepest since the global financial crisis of July 2009, was propelled by skyrocketing mortgage expenses that have deterred potential homebuyers. Presently, the average house price is down by over £14,500 from the previous year, with mortgage approvals witnessing a 20% decline relative to figures before the pandemic.
A 0.8% monthly decrease was recorded in August relative to July, bringing the average cost of a UK residence to £259,153.
Robert Gardner, Nationwide’s chief economist, commented, “The decline is anticipated considering the recent surge in borrowing costs, which led to a subdued housing market performance relative to the period before the pandemic.”
In reaction to the Bank of England’s decision, which involved 14 interest rate hikes since December 2021, escalating from 0.1% to 5.25%, mortgage rates have significantly increased.
In comparison to 2019, the first half of this year experienced a 20% reduction in completed house sales, and a 40% decrease compared to 2021 – a period during which the UK housing market thrived due to attractive interest rates and the introduction of a stamp duty break.
While cash purchases remain robust, the frequency of mortgage-required completions has taken a hit. Gardner noted, “For the first six months of 2023, the completions involving a mortgage for home movers were down by 33% from 2019, and those by first-time purchasers were about 25% less. However, cash purchases experienced a 2% increase. This trend, highlighting the reduced mortgage activity, is largely due to the pronounced hike in mortgage rates in the recent past.”
Earlier in the week, property platform Zoopla’s study forecasted the sales of UK houses this year to reach their lowest in over ten years, as exorbitant mortgage costs discourage buyers.
The anticipation is for house sales completions in 2023 to drop by 21% year-on-year, settling at around 1 million – a figure not seen since 2012.
Tomer Aboody, a director at property lender MT Finance, remarked, “Continuous hikes in interest rates challenge potential buyers’ affordability. Many are left with no choice but to hold off until stability returns. With recent positive news about inflation, it would be beneficial for the Bank of England to delay the upcoming rate increase, granting the market some time to recalibrate.”
The cumulative effect of these economic shifts underscores the intricate dance between national financial policies and the housing market. As the UK grapples with these changes, prospective homeowners and investors alike are urged to tread with caution. With the landscape changing rapidly, informed decision-making becomes pivotal. However, with the right policies in place and a more stabilized financial environment, there is hope that the housing market will find its balance once again.
