Industry experts not surprised at the figures
House prices fell by 1% in May 2023 compared with the same month last year, marking the first time since 2012 that house prices have fallen year-on-year, according to mortgage lender Halifax.
The average house price in the UK also decreased very slightly from £286,662 in April to £286,532 in May, recording a flat monthly house price growth rate.
“Given the effectively flat month, the annual decline largely reflects a comparison with strong house prices this time last year, as the market continued to be buoyant heading into the summer,” Kim Kinnaird, director at Halifax Mortgages, commented.
“As expected, the brief upturn we saw in the housing market in the first quarter of this year has faded, with the impact of higher interest rates gradually feeding through to household budgets, and in particular those with fixed rate mortgage deals coming to an end.”
The latest Halifax House Price Index also showed that property prices have now fallen by about £3,000 over the last 12 months and are down around £7,500 from the peak in August 2022. However, prices are still £5,000 up since the end of last year, and £25,000 above the level of two years ago.
“With consumer price inflation remaining stubbornly high, markets are pricing in several more rate rises that would take base rate above 5% for the first time since the start of 2008,” Kinnaird said. “Those expectations have led fixed mortgage rates to start rising again across the market.
“This will inevitably impact confidence in the housing market as both buyers and sellers adjust their expectations, and latest industry figures for both mortgage approvals and completed transactions show demand is cooling. Therefore, further downward pressure on house prices is still expected.”
Numbers not surprising
Gareth Lewis, managing director at property lender MT Finance, said that the Halifax numbers are unsurprising, also citing the fall in transactions.
“The numbers also reflect that those who are willing to buy are less bullish when it comes to committing to higher house prices because everything is costing more, so they are going to chip away at the price,” he added.
“Mortgage borrowers, on the whole, other than perhaps some first-time buyers, can still afford a mortgage but just have to be prepared to put their hand in their pocket a bit more. This is all part of what is essentially a re-education process; money isn’t free and you are going to have to pay more for it in future. The housing market will inevitably be quieter as a result.”
Kevin Dunn, mortgage and protection adviser at mortgage broker Furnley House, said that while the headline number showing the first negative annual price growth in over a decade makes for grim reading, the flat trajectory of growth in May is a better reflection of where the market is at.
“Buyers have now adjusted to the higher interest rate world we’re in,” he pointed out. “The property market is proving more resilient than many thought given the sheer number of headwinds facing the economy, although what happens later this month at the next MPC meeting could clearly have an influence moving forward.”
Nicky Stevenson, managing director at national estate agent group Fine & Country, echoed Dunn’s sentiment, noting that although the higher interest rate environment had become an accepted new-normal, buyers would still be keeping a close eye on the next Bank of England interest rate decision.
“Homes are still selling well, though many at a lower price than seen over previous months, with agreed sales over the four weeks in May reaching their highest point so far this year, up 11% on the five-year average on the same period,” she said.
“However, the recent removal of some mortgage products ahead of another base rate review later this month suggests that there are still some hurdles to overcome.”
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