Home Property Finance & InvestmentMortgages House prices see the biggest fall since 2008 as market continues to contract

House prices see the biggest fall since 2008 as market continues to contract

by LLP Finance Reporter
7th Dec 22 3:46 pm

According to this morning’s data, a typical UK property now costs £285,579 – down from £292,406 last month.

The slowing market is reflected across the UK, with most nations and regions seeing the rate of annual house price inflation fall last month.

The only exception remains the North East of England, which saw its rate of annual growth edge up slightly to +10.5% (from +10.4%). It’s also now the only area of the UK with annual house price inflation in double figures, with an average property price of £173,587.

Wales (+7.9%, average price of £220,689) and the South West (+8.4%, average price of £307,750) have seen the sharpest slowdown of annual growth (from +11.5% and +10.7% respectively). This is notable given both were key hotspots of house price inflation during the pandemic, suggesting that previous drivers of the market such as the race for space and heightened demand for rural living are now receding.

Scotland has also seen its pace of annual house price inflation continue to slow, now at +6.5% (from +7.4%) with a typical property now costing £203,132.

House prices in Northern Ireland are up +9.1% year-on-year, easing back from +9.7% last month, with an average property price of £185,097.

The pace of annual property price inflation also slowed in London, which continues to lag the other UK regions and nations. House prices have risen +5.2% over the last 12 months, down from +6.6%. The average property price in the capital remains well above the UK average at £549,160.

Kim Kinnaird, Director, Halifax Mortgages, said: “Average house prices fell in November as the rate of annual growth slowed further to +4.7% (from +8.2%), with the typical UK property price now sitting at £285,579. The monthly drop of -2.3% is the largest seen since October 2008 and the third consecutive fall.

“While a market slowdown was expected given the known economic headwinds – and following such extensive house price inflation over the last few years (+19% since March 2020) – this month’s fall reflects the worst of the market volatility over recent months.

“Some potential home moves have been paused as homebuyers feel increased pressure on affordability and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise.

“When thinking about the future for house prices, it is important to remember the context of the last few years, when we witnessed some of the biggest house price increases the market has ever seen. Property prices are up more than £12,000 compared to this time last year, and well above pre-pandemic levels (+£46,403 vs March 2020).

“The market may now be going through a process of normalisation. While some important factors like the limited supply of properties for sale will remain, the trajectory of mortgage rates, the robustness of household finances in the face of the rising cost of living, and how the economy – and more specifically the labour market – performs will be key in determining house prices changes in 2023.”

Nathan Emerson, Chief Executive of Propertymark, said: “Our member agents tell us of a more realistic and affordable market as sale prices achieved continue to fall. This however now means that some sellers’ expectations as to the sale price may now not be achievable as demand from buyers starts to cool off from previous record-high levels.

“Our latest Housing Insight Report recorded that 69 per cent of branches had most sales agreed below asking price in October. This compares to a low of just 15 per cent in March but to a pre-pandemic average of 78 per cent (2015-2020), suggesting we are still not back to the normal market balance.

“A good agent which is regulated and operates to higher standards will be in touch with current market trends and will be able to realistically value homes for a fair and efficient sale. We would recommend that sellers use a Propertymark Protected agent to receive the best service.”

Tom Bill, head of UK residential research at Knight Frank, said: “House prices in November moved sharply in the opposite direction to mortgage rates, which spiked following the mini-Budget. The slightly confusing message for buyers and sellers is that mortgage rates should continue to edge down even as the Bank of England raises the base rate.

“However, even as the financial pain becomes less acute in coming months, we expect it to become more widespread as more favourable mortgage offers made before the mini-Budget lapse. This should take house prices back to where they were in the summer of 2021, erasing around half of the 20%+ gain they made during the pandemic.”

Emma Cox, MD of Real Estate at Shawbrook Bank, comments: “Scepticism among buyers looks set to continue as the property market experiences its third consecutive month of declining house prices.

“The combined effects of double-digit inflation, alongside the UK’s slow march into recession is keeping many would-be first-time buyers away from entering the market. However, the reluctance demonstrated by this group presents estate agents and landlords with greater opportunities to shift rental properties, particularly to younger individuals who are hesitant to make the transition from renting to homeownership in the current economic climate.

“With prices looking set to fall even further from the record levels experienced in the Summer, and the effect of the mini-budget still being felt, we expect to see professional landlords and real estate investors capitalising on the availability of cheaper stock to expand their buy-to-let portfolios.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The housing market surveys are catching up with what’s been happening on the ground for the past few months.

“Existing sales are holding up, providing no one in the chain has to remortgage at a much higher rate. As a result, prices are softening but continue to be supported by low stock and strong employment.

“New business is hard to come by and only slowing returning now lending rates are starting to fall with buyers factoring in where they expect pricing to be next year.”

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