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House prices see largest annual drop for 14 years – Nationwide

  • 31/03/2023
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House prices see largest annual drop for 14 years – Nationwide
Average UK house prices fell 3.1 per cent in March to £257,122, the steepest annual drop recorded since July 2009.

The Nationwide house price index showed that this was compared to a 1.1 per cent decline in February. Prices are also 4.6 per cent down on the August peak of £273,751, when prices rose 10 per cent year-on-year. 

On a monthly basis, UK house prices fell by 0.8 per cent, making this the seventh consecutive monthly decline. 

Robert Gardner, chief economist at Nationwide, said: “The housing market reached a turning point last year as a result of the financial market turbulence which followed the mini Budget. Since then, activity has remained subdued – the number of mortgages approved for house purchase remained weak at 43,500 cases in February, almost 40 per cent below the level prevailing a year ago.” 

He added: “It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation. Housing affordability also remains stretched, where mortgage rates remain well above the lows prevailing at this point last year.” 


Falling prices across most regions 

According to Nationwide’s data, nine of the 13 regions recorded saw annual price declines in Q1. 

Scotland was the weakest performing region in Q1, with a 3.3 per cent drop in house prices to £172,676. This was compared to a 3.3 per cent growth during the same period last year. 

East Anglia reported the weakest Q1 performance in England, despite being the strongest in Q4 2022. Prices in East Anglia fell by 1.8 per cent year on year to £272,207 and compared to a 6.6 per cent increase in Q1 2022. 

The West Midlands saw the highest average price increase in Q1 with a 1.4 per cent rise to £236,476. This compared to a growth of 6.1 per cent during the same period last year. 

It was one of the only regions to see Q1 prices rise on an annual basis, along with Northern Ireland, South West and East Midlands. 

London remains the most expensive region for house prices, with a 1.4 per cent decline bringing average values to £511,293. The least expensive region is the North, where a 0.5 per cent fall brought prices to £152,308. 

Will Rice, CEO of Generation Home, said: “We expect house prices to stabilise throughout 2023. The majority of the correction has already happened, and while there may be a little room left to fall, it won’t be much.  

“Inflation will be the key driver of the housing market in the near future. It will determine what the Bank of England decides to do with the base rate, which will directly pass through to mortgage rates and housing costs, which, in turn, will affect the level of demand from buyers, determining house prices.” 


Returning buyer motivation 

While the drop in house prices was unsurprising, industry figures said this and stabilising mortgage rates was encouraging buyer demand.  

Jonathan Hopper, CEO of Garrington Property Finders, said the declines were gradual especially compared to the “dizzying and unsustainable surge in prices” after the pandemic. 

He added: “Above all, this has become a buyer’s market. With the number of sales well down on what it should be for this time of year, sellers and their estate agents are chasing buyers – and proceedable buyers who have their finances in place hold all the cards. 

“Buyer demand is holding up far better than many had dared hope, but buyers are intensely price sensitive. 

“Buying a home in a weakening market is always disconcerting, but softening prices strengthen buyers’ hands and enable them to negotiate harder. With the mortgage market beginning to settle, falling prices may even provide a window of opportunity for first-time buyers previously frozen out by rising interest rates.” 

Ross Boyd, CEO, Dashly, said it was good news that rates had remained stable in the last few months.  

He added: “Interest rates won’t come down as fast as they went up. The reality is that rates have been uncharacteristically low for such a long time that borrowers have got used to this. Having a standard variable rate of seven per cent and base rate of 4.5 per cent really is just a return to normality and therefore shouldn’t put people off buying.” 

Daniel Field, managing director of The Mortgage Dog, said: “While higher interest rates have certainly put the property market under pressure, on the whole committed buyers have shown real resilience and have continued pursuing their house purchases even in the face of changing market conditions.  

“With proper financial planning, many homeowners and prospective buyers are still managing to successfully navigate the higher borrowing rates we have today and are still achieving their property goals. The collapse in demand and astronomical house price drops some predicted simply haven’t materialised.” 

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