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House price growth falls for first time since 2012 – Halifax

  • 07/06/2023
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House price growth falls for first time since 2012 – Halifax
On an annual basis, house price growth fell to negative one per cent in May, which is the first annual decline since December 2012, according to the latest figures.

According to Halifax’s House Price Index, the annual rate of house price growth in May fell to negative one per cent compared to plus 0.1 per cent in April.

The report continued that the average house price remained flat in May compared to a 0.4 per cent growth in April.

The bank said that the average UK property stands at £286,532, which is down by around £130 compared to April.


Regional and property type view

The South East reported strongest price falls at negative 1.6 per cent, followed by South West at negative 1.4 per cent and Greater London at negative 1.2 per cent.

The West Midlands was the best performing region with annual growth at plus 2.7 per cent, followed by Yorkshire and the Humberside at plus 2.3 per cent.

Scotland and Northern Ireland both reported a fall in annual price growth, going to plus 1.3 per cent and 1.5 per cent respectively, while Wales stayed static at plus 1.1 per cent.

The report continued that property prices were under most pressure among homemovers where annual growth decreased by 1.1 per cent in May. This compared to plus 0.3 per cent for first-time buyers.

It added that existing houses fell in value with an annual growth of negative 1.9 per cent, but new build value continued to rise at around plus 2.8 per cent. The report said that the latter was the weakest rate for nearly three years.

All property types barring detached houses, which increased year-on-year by 0.4 per cent, had annual declines, with the sharpest fall recorded for flats at negative 1.9 percent, terraced homes at negative one per cent and semi-detached houses at negative 0.5 per cent.


Higher interest rate hit budgets

Kim Kinnaird, director of Halifax Mortgages, said: “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.”

She noted that property prices had fallen by around £3,000 over the last 12 months and were down from around £7,500 from their peak in August. However, prices are up £5,000 since the end of last year and £25,000 above the level of two years ago.

She added: “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.

“With consumer price inflation remaining stubbornly high, markets are pricing in several more rate rises that would take base rate above five per cent for the first time since the start of 2008. Those expectations have led fixed mortgage rates to start rising again across the market.”

Kinnaird continued: “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.

“One continued source of support to house prices is the labour market. While unemployment has recently ticked up from very low levels, brisk wage growth would over time help to improve housing affordability, if sustained.”


‘The housing market will inevitably be quieter’

Gareth Lewis, managing director of property lender MT Finance, said that the numbers were “unsurprising”, especially given the decrease in transactions.

He continued: “They 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.”

Lewis added that mortgage borrowers on the whole, perhaps barring some first-time buyers, can still afford a mortgage but “have to be prepared to put their hand in their pocket a bit more”.

He noted: “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.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said that lenders were continuing to up their rates and were “pulling products with little or no notice in response partly to funding costs and in response to what other lenders are doing”.

“This will inevitably impact what buyers can afford and in some cases they may put decisions on hold until the situation improves.

“Swap rates, which underpin the pricing of fixed-rate mortgages, have settled since the inflation news sent them soaring. If this continues, we would expect mortgage pricing to also become less volatile,” he explained.

Harris urged borrowers coming up for remortgage to seek advice from a broker and consider reserving a rate for “peace of mind”.


Market recovery threatened

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said that the figures exclude cash sales and reflected activity from a few months ago, but they did confirm recent trends that “tentative market recovery is being threatened by the prospect of more interest rate rises and stubbornly high inflation”.

He added: “However, the survey shows prices are still considerably above where they were two years ago so cash and equity-rich buyers in particular are recognising the opportunities.

“Many mortgage holders too will be relieved that their lenders built in a buffer of at least two or three percentage points at the outset, provided of course their circumstances have not substantially changed.”

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