UK home costs fall at quickest tempo since 2009 in August, says Halifax

Home costs fell at their quickest charge for the reason that monetary disaster in August, in keeping with the most recent home value index from Halifax, the UK’s largest mortgage lender.

Costs dropped by 4.6 per cent final month in contrast with the identical month a yr in the past. That’s the greatest year-on-year drop that Halifax has recorded since summer season 2009, echoing Nationwide’s value index final week.

The common home value within the UK is now 279,569, £14,000 under the height in September 2022 and again to the place it was firstly of final yr.

On Halifax’s measure, costs have now fallen for 5 consecutive months, having retreated 1.9 per cent in August. That was a lot worse than each the 0.3 per cent dip that economists had predicted and the 0.4 per cent fall recorded in July.

August’s month-on-month decline was the steepest since final November, when the housing market was nonetheless feeling the shocks from the mini-budget.

Kim Kinnaird, Halifax’s director of mortgages, mentioned: “Market exercise ranges slowed throughout August and whereas there may be all the time a seasonality impact at the moment of yr it additionally isn’t shocking given the tempo of mortgage charge will increase over June and July.

“This may occasionally effectively have prompted potential consumers to defer transactions within the hope of some stability and larger readability on the longer term course of charges within the coming months.”

David Thomas, chief government of Barratt Developments, one among Britain’s greatest housebuilders, mentioned yesterday that would-be consumers, particularly first-time consumers, had been “pushing their selections down the highway”.

The mini-budget final September prompted chaos within the bond markets and led to borrowing prices, together with mortgages, spiralling quickly and builders and property brokers noticed a direct drop in demand. As mortgage charges began to ease within the opening months of 2023 there was a quick enchancment out there this spring, however that had pale by the beginning of the summer season as robust inflation knowledge led to a different spherical of mortgage charge rises.

“It’s honest to say that home costs have confirmed extra resilient than anticipated thus far this yr, regardless of larger rates of interest weighing on purchaser demand,” Kinnaird mentioned.

“Nonetheless, there may be all the time a lag impact the place charge will increase are involved and we could now be seeing a larger impression from larger mortgage prices flowing by way of to deal with costs.”

Costs are falling in each area, however within the southeast of England, the place properties are dearest, they’re beneath probably the most strain, down 5 per cent over the previous 12 months. In Scotland, in contrast, costs are solely 0.6 per cent under the place they had been this time final yr.

Kinnaird expects “additional downward strain on property costs”, as do economists. Costs have fallen by about 5 per cent from their peak final September and Imogen Pattison, assistant economist at Capital Economics, thinks they’re more likely to fall by one other 5.5 per cent.

“Excessive mortgage charges will imply demand stays very weak whereas beforehand tight provide of second-hand properties available on the market is easing,” she mentioned. “Because of this, we anticipate home costs to proceed to drop till mid-2024.”

Such was the competitiveness of the housing market over the pandemic — with the “race for house”, lockdown financial savings and stamp obligation holidays — that even after the latest wobble the common home value remains to be £40,000 above pre-covid ranges. That wobble has helped to enhance the affordability of homes, although. The home price-to-income ratio for first-time consumers has dropped from a peak of 5.8 occasions final summer season to five.1 occasions, probably the most reasonably priced stage since June 2020.