It is a first for house price growth level in over 10 years
Annual house price growth fell to its weakest level since November 2012, plunging into negative territory also for the first time since June 2020, according to the latest Nationwide House Price Index.
Prices went down by 1.1% to £257,406 in February compared with the same month last year. In addition, February saw a further monthly price fall of 0.5% – the sixth in a row, leaving prices 3.7% below their August peak.
House prices down 1.1% year-on-year in February - first annual decline since June 2020 & weakest level since Nov 2012. Prices fell 0.5% month-on-month in February. Full report: https://t.co/JyFlul1X21 #housing #housingmarket #houseprices #prices
— NBS External Affairs (@NationwidePress) March 1, 2023
“The recent run of weak house price data began with the financial market turbulence in response to the mini budget at the end of September last year,” Robert Gardner, chief economist at Nationwide Building Society, said. “While financial market conditions normalised some time ago, housing market activity has remained subdued.
“This likely reflects the lingering impact on confidence, as well as the cumulative impact of the financial pressures that have been weighing on households for some time. Indeed, inflation has continued to outpace wage growth and mortgage rates remain significantly higher than the lows recorded in 2021.
“Even though consumer sentiment has improved in recent months, it is still languishing at levels prevailing during the depths of the financial crisis.”
Gardner, in the house price index report, stated that it would be hard for the market to regain much momentum in the near term since economic headwinds look set to remain relatively strong, with the labour market widely expected to weaken as the economy shrinks in the quarters ahead, while mortgage rates remain well above the lows prevailing in 2021.
“Indeed, despite the modest fall in house prices, for a prospective first-time buyer earning the average income looking to buy the typical home, mortgage payments remain well above the long run average as a share of take-home pay,” he pointed out. “In addition, deposit requirements remain prohibitively high for many and saving for a deposit remains a struggle given the rising cost-of-living, especially for those in the private rented sector, where rents have been rising strongly.
“However, conditions should gradually improve if inflation moderates in the coming months as expected, easing pressure on household budgets. Solid gains in nominal incomes together with weak or declining house prices will also support housing affordability, especially if mortgage rates edge lower in the coming months.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said that the latest figures reiterate continuing worries about interest rates and inflation, which are keeping prices in check. He, however, stressed that the market is not in free-fall.
“On the ground, we are seeing more listings and protracted sales, so buyers who have more choice are taking longer and negotiating harder when making offers,” Leaf said.
James Briggs, head of personal finance intermediary sales at specialist lender Together, commented that it is likely activity could slow somewhat further in the coming months.
“The House Builders Federation warned that the number of new properties completed each year in England could slump to its lowest level since the Second World War,” Briggs noted. “With the Spring Budget approaching, borrowers will be closely watching for any signs of additional mortgage support to relieve ongoing uncertainty. Whether this comes to fruition is not yet clear.”
Mark Harris, chief executive at mortgage broker SPF Private Clients, added that average property prices fell as higher mortgage costs, along with the rising cost-of-living, have an inevitable impact on affordability.
“Swap rates, which underpin the pricing of fixed-rate mortgages and have been falling since the turmoil created by the mini budget in September, have taken a turn and moved the other way in the past couple of weeks on the back of expectations of further base rate rises,” he said. “Subsequently, several lenders who launched sub-4% five-year fixed-rate mortgages have since increased these, with mortgage rates likely to be up and down in coming weeks.
“Borrowers should seek advice from a whole-of-market broker before either taking the plunge or holding off in the expectation that rates will come down further.”
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