Property prices fell year-on-year for first time since 2012 in May
Property prices fell by 1% in May compared to the same month last year, representing the first time since 2012 that house prices have fallen year-on-year, according to the Halifax house price index.
On a monthly basis, the average price of a home in the UK fell from £286,662 in April to £286,532 in May.
Jamie Minors (pictured), managing director at Minors & Brady, said though the annual rate of house price growth is in the red for the first time since 2012, this has a lot to do with the strength of the property market this time last year.
Accurately gauging the market
Minors said the fact that growth remained flat in May is a more accurate gauge of the market.
“Clearly the volatility in the mortgage sector at the tail end of the month is likely to have impacted some buyers’ confidence, but they have not headed for the hills,” he said.
The jobs market is a massive driver of sentiment, and, for now, Minors said that it is holding up, with all eyes turning to the next interest rate decision later this month.
Kim McGinley, director at Vibe Specialist Finance, said annual house price growth may be down for the first time in 11 years, but what we are witnessing is a correction rather than a crash. After the mini budget, McGinley said confidence in the property market fell sharply, but during the spring, sentiment steadily improved as mortgage rates came down and the economic outlook felt less bleak.
“Despite the upheaval in the mortgage market over the past fortnight, people have accepted the new rate environment and are getting on with their lives,” she added.
Housing demand to prevail
Chris Barry, director at Thomas Legal, said while there is likely to be a cooling in demand over the next month or two, committed buyers will continue to buy.
“We had a record May in terms of the number of new enquiries, but it is likely June and July activity could decline as the number of new buyers coming to the market reduces following the latest spate of mortgage rate increases,” Barry said.
In his experience, estate agents have the highest stock levels in years and clients who have mortgage offers, but have not found a property yet, are making offers before the product they have secured expires.
“House prices have risen circa 30% over the past four years, so I do not see a small pullback in value caused by the mortgage market mayhem of the past fortnight affecting buyer behaviour that much,” Barry added.
John Choong, markets analyst at Investing Reviews, said the latest CPI inflation print caused a ruckus in the mortgage market, as smaller mortgage providers withdrew their packages within hours as gilt yields spiked.
“However, this seems to be a blip in the grand scheme of things, as mortgage providers are beginning to report a rebound in customer activity after a hectic fortnight,” he said.
As such, Choong said house prices going into the second half of the year should remain relatively steady as unemployment remains at healthy levels with slowing inflation also easing pressures on household income.
More encouragingly, he said gilt yields have dropped back to their pre-April CPI inflation print levels, which could help to push mortgage rates lower in the months to come.
“Having said that, you cannot rule out higher mortgage rates if inflation continues to come in hotter than expected,” Choong added.
Nick Harris, co-founder at Quarters Residential Estate Agents, said despite the uncertainty that gripped the mortgage market at the end of May and during June to date, the property market is still moving along.
“While some discretionary buyers continue to sit tight, serious buyers remain very active,” he added.
Harris said sellers are being much more realistic on price, as are buyers, so a more balanced property market is being observed.
“Though there has been some turbulence during the past two weeks, the property market Armageddon some predicted is simply unlikely to materialise,” Harris said.
Do you believe the strength of the mortgage market will prevail in the face of declining house prices? Let us know in the comment section below.
