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UK house prices fall 3.3% over the year with declines expected during 2024

UK house prices fall 3.3% over the year with declines expected during 2024
Nick Cheek
Written By:
Nick Cheek
Posted:
03/11/2023
Updated:
03/11/2023

Property prices fell 3.3% over the year to October, according to Nationwide Building Society’s latest House Price Index.

This means the price of an average UK home has now fallen to £259,423, according to the lender.

There was a small increase (0.9%) in prices between September and October this year, likely down to low levels of market activity rather than a sign of an upturn.

However, Nationwide noted that mortgages approved for house purchase were down 30% on 2019 levels.

Robert Gardner, the mutual’s chief economist, said: “The uptick in house prices in October reflects the fact that the supply of properties on the market is constrained.

“There is little sign of forced selling, which would exert downward pressure on prices, as labour market conditions are solid and mortgage arrears are at historically low levels.”

Sarah Coles, head of personal finance at Hargreaves Lansdown, agreed. She said: “A dearth of property for sale has underpinned house prices in October, as sellers sat on their hands. But this small bump isn’t a sign of a price resurgence round the corner.

“The relative strength of the jobs market, and the fact that so many people have fixed rate mortgages, means we’re not seeing large numbers of people being forced to sell up, which is keeping a floor under house prices for now.”

 

What’s next?

Nationwide expects that both activity and house prices ‘are likely to remain subdued in the coming quarters’, due to weak consumer confidence.

The sentiment was shared by Alice Haine, personal finance analyst at investment platform, Best Invest, who said: “The outlook from here is far from rosy as sky-high borrowing costs and the continued squeeze on household incomes forces some to delay buying plans because they are unable to secure a mortgage.”

The outcome of the Bank of England’s Monetary Policy Committee decision on the base rate tomorrow will have an impact, with many expecting rates to be held this month.

“While another pause delivers good news for first-time buyers buoyed by robust wage growth and easing mortgage rates, interest rates are now forecast to stay higher for longer to constrain demand, which could add further downward pressure on residential property prices,” Haine added.

 

Affordability squeeze continues

Chief executive of mortgage broker SPF Private Clients, Mark Harris, warned that higher rates are here to stay for the foreseeable future, impacting buyer affordability and therefore property prices.

“While interest rates appear to have peaked, those hoping rates will move swiftly downwards again to the rock-bottom levels of the recent past are likely to be disappointed,” he said.

“Pricing is higher than borrowers have grown used to over the years, meaning those buyers relying on mortgages are more price-sensitive on the back of ongoing affordability concerns.”

Rob Morgan, chief investment officer at Charles Stanley Direct, agreed the future looks ‘increasingly bleak’, despite house prices having proven resilient for the last two years.

He explained: “There remains a significant affordability gap to close, so it would not be a surprise to see price falls continue into 2024 as more households become affected by rising interest rates and relatively few people can commit to make their first purchase or trade up.”