House prices edge down for third consecutive month: Halifax

Average house prices slipped by a further -0.1% in June, sustaining their decline for the third month in a row as the market continues to cool. The price of a typical UK property now costs £285,932 (vs peak of £293,992 last August), according to Halifax data released this morning.

Related topics:  Property,  house prices,  Halifax
Property | Reporter
7th July 2023
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"These latest figures do suggest a degree of stability in the face of economic uncertainty, and the volume of mortgage applications held up well throughout June, particularly from first-time buyers"

Nations and regions' house prices

Average house prices are now falling on an annual basis in most parts of the UK, with the only exceptions being the West Midlands (+1.5%, average house price of £251,139), along with marginal gains in Yorkshire & Humberside (+0.2%, £203,674) and Northern Ireland (+0.2%, £186,856).

The South of England remains the area where house prices are facing the most downward pressure. At -3.0%, the annual fall in the South East was the largest since July 2011 (average house price now £384,106).

London recorded an annual decline of -2.6% (average property price of £533,057), its weakest performance since October 2009 and a drop of around £15,000 over the last year.

Welsh house prices were down by -1.8% annually (average house price of £215,183), compared to a +1.0% increase in May – the nation’s first year-on-year fall since March 2013.

In Scotland, prices were down slightly on the year (-0.1%, average house price of £201,774), but nonetheless significant in being the first annual contraction in property prices in the last three years.

Kim Kinnaird, Director, Halifax Mortgages, said:

“The average UK house price fell slightly in June, down by around £300 compared to May (-0.1%) with a typical property now costing £285,932. This was the third consecutive monthly fall, albeit it a modest one.

“The annual drop of -2.6% (-£7,500) is the largest year-on-year decrease since June 2011. With very little movement in house prices over recent months, this rate of decline largely reflects the impact of historically high house prices last summer – annual growth peaked at +12.5% in June 2022 – supported by the temporary Stamp Duty cut.

“To some extent the annual growth figure also masks the fluctuations we’ve seen in the market over the past 12 months. Average house prices are actually up by +1.5% (£4,000) so far this year, with most of that growth coming in the first quarter, following the sharp fall in prices we saw at the end of last year in the aftermath of the mini-budget.

“These latest figures do suggest a degree of stability in the face of economic uncertainty, and the volume of mortgage applications held up well throughout June, particularly from first-time buyers. That said the housing market remains sensitive to volatility in borrowing costs.

"Concerns about persistent inflation have led to a significant increase in the cost of funding. Coupled with the base rate rising by another 50bp, this contributed to a big jump in typical mortgage rates over the last month.

“The resulting squeeze on affordability will inevitably act as a brake on demand, as buyers consider what they can realistically afford to offer. While there’s always a lag effect when rates go up, many existing mortgage holders with variable deals or rolling off fixed rates will likely face an increase in the next year.

“The recently announced Mortgage Charter provides important reassurance that mortgage holders have a range of options if they’re concerned about making repayments, and that lenders will be flexible when supporting anyone in difficulty. Extended terms, affordable repayment plans and alternative fixed-rate deals are among the choices for existing borrowers seeking to mitigate the impact of higher interest rates.

“How deep or persistent the downturn in house prices will be remains hard to predict. Consumer price inflation is likely to come down in the near term as energy and food prices look set to reverse their steep rises, but core inflation is clearly proving stickier than originally expected.

"With markets now forecasting a peak in Bank Rate of over 6%, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue to put downward pressure on house prices over the coming year.”

Nathan Emerson, CEO of Propertymark, comments: “It is inevitable that people’s finances are going to be impacted by rising interest rates, and there is a higher chance of a fall through in a sale due to the changes in buyers’ finances.

“However, serious buyers and sellers are rightly putting their confidence in the market and the majority are successfully and affordably moving home. Negotiations being made on properties are allowing wiggle room and bringing down the overall cost from the pandemic house price boom which was desperately needed as they were previously unrealistic and unsustainable.”

Chris Druce, senior research analyst at Knight Frank, said: “The fear factor over just how high the Bank of England will push the bank rate to tame inflation continues to grip the UK property market.

“While deals continue to be struck, buyers remain nervous and extremely price sensitive. This won’t change materially until we have surety about how high borrowing costs will go.

“It means that despite a period of relative stability, house prices have further to travel on their downward journey. More pain will enter the system in the second half of this year as an increasing amount of fixed-term mortgages are renewed at higher rates. We expect prices will fall by 10%, spread over the remainder of this year and next.

“When stability returns, demand could prove more resilient than expected given the cushioning effect of strong wage growth, record levels of housing equity, amassed lockdown savings, the availability of longer mortgage terms and forbearance from lenders.”

Anna Clare Harper, CEO of GreenResi, says: "The average house price was £285,932, down 2.6% according to Halifax, which is partly a market correction. Housing policy has focused on the needs of homeowners, and on debt to fund new supply, for a long time. With higher interest rates, price growth is being corrected. However, describing a shift in the market affecting millions of people as a ‘market correction’ misses the point.

"We need to look beyond aggregated property prices at a point in time and consider the environmental and social realities and implications, just as professional investors are increasingly required by regulations to monitor and report on their Environmental Social and Governance (ESG) credentials, which in turn affect prices and values.

"To meet Zero 2050, we must retrofit (improve the energy efficiency of an existing building) one home every two minutes. The price of homes that are not upgraded will fall relative to others, in particular in the rental market.

"To save ‘Generation Rent’ from homelessness, we must stem the exodus of landlords by allocating professional capital to existing private rental sector homes. Homes which can be, and are, rented out will be more valuable than low quality, low energy efficiency homes no longer considered fit for use under the planned Decent Homes Standard.’

Jeremy Leaf, north London estate agent and a former RICS residential chairman says: "This slow puncture softening in house prices reinforces the message from other recent surveys that financial markets pricing in further interest rate increases is not helping buyer confidence.

"However, these figures are a little dated so don't yet fully reflect the recent sharp increases in mortgage payments.

"On the ground, sales are still proceeding often to those who are not dependent on mortgage finance but they are taking longer and often involve protracted renegotiations resulting in modest, rather than large, price falls."

Matt Thompson, head of sales at Chestertons, comments: “We are seeing more cash buyers but also house hunters who rather buy now before facing another potential hike in interest rates. This June, our branches conducted 20% more viewings than in June of last year.

"The capital’s high rents are another contributing factor to London’s continuous buyer interest. As tenants are facing rent increases, many are reviewing their situation and conclude that, despite higher interest rates, buying can still present a financially attractive option.”

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