House prices see biggest monthly fall since 2008

Ray Bolger says house prices set to fall '10% next year

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House prices fell by 2.3 percent last month, marking the biggest monthly drop since 2008, according to the Halifax House Price Index. The annual rate of house price growth slowed to 4.7 percent, from 8.2 percent with the average UK house price in November at £285,579. Halifax reports.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “[I]t takes around three months for a sale to move from being agreed to being completed, so these figures reflect sellers’ decisions in August – before the disastrous mini-budget. It means buyers were already getting cold feet before (former Chancellor) Kwasi Kwarteng’s announcement forced mortgage rates through the roof. Since then, the fallout from the mini-budget mayhem has been a catastrophic loss in confidence.”

Kim Kinnaird, director of Halifax Mortgages, said: “The monthly drop of 2.3 percent is the largest seen since October 2008 and the third consecutive fall.

“While a market slowdown was expected given the known economic headwinds – and following such extensive house price inflation over the last few years (19 percent growth since March 2020) – this month’s fall reflects the worst of the market volatility over recent months.

“Some potential home moves have been paused as homebuyers feel increased pressure on affordability and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise.

“When thinking about the future for house prices, it is important to remember the context of the last few years, when we witnessed some of the biggest house price increases the market has ever seen.”

“Property prices are up more than £12,000 compared with this time last year, and well above pre-pandemic levels (a £46,403 increase compared with March 2020).

“The market may now be going through a process of normalisation.

“While some important factors like the limited supply of properties for sale will remain, the trajectory of mortgage rates, the robustness of household finances in the face of the rising cost of living, and how the economy – and more specifically the labour market – performs will be key in determining house prices changes in 2023.”

Halifax said Wales and the south west of England have recorded particularly sharp slowdowns in annual house price growth.

Both have been key hotspots of house price inflation during the coronavirus pandemic, suggesting that previous drivers of the market such as the “race for space” and heightened demand for rural living are now receding, Halifax said.

The pace of annual property price inflation also slowed in London, which continues to lag the other UK regions and nations. The average property price in London remains well above the UK average.


Ms Coles told “We know that the mayhem the mini-budget unleashed in the mortgage market meant a collapse in confidence in September and October, but these figures show the market was cooling even before then. It takes around three months for a sale to move from being agreed to being completed, so these figures reflect sellers’ decisions in August, when the average two-year fixed rate mortgage was only around 2.52 percent. Inflation at the time was 10 percent, so soaring prices are likely to have played a major role.

“Since then, the fact the average two-year fixed rate peaked at 6.65 percent on October 20 will have blown an Arctic chill through the market. We know buyer demand continued to fall and mortgage approvals fell away too. And despite the fact rates have fallen back a little since, the damage has been done. We can expect this to be reflected in another sizeable monthly fall next month, and in early 2023 we’ll be looking at annual price falls.

“The Government isn’t in the driving seat here. It has a short-term stamp duty break on the table, but it hasn’t been enough to persuade a rush of buyers to enter the market again. Instead, mortgage rates will be key, alongside the overall economic picture. If we go into a deep and prolonged recession, we can expect lower house prices to endure.”

Ms Coles added that the fallout from the mini-budget mayhem has been “a catastrophic loss in confidence”. She said: “Even though mortgage rates are starting to fall again from the peaks, we’re still seeing sales fall through, while new buyers and sellers decide to bide their time.

“RICS figures show buyer demand is still sliding, and lower mortgage approval figures from the Bank of England show that it’s unlikely to bounce back in the short term. Market confidence has plummeted and nobody is in a hurry to buy in a falling market.

“The fact we’re highly likely to be in a recession is only going to make people less confident about splashing out on a new home. So as bad as these figures are, things could get even worse as we go into 2023.”

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The slowing market is reflected across the UK with most nations and regions seeing the rate of annual house price inflation fall last month, according to Halifax.

The only exception remains the North East of England, which saw its rate of annual growth edge up slightly to 10.5 percent (from 10.4 percen). It is also now the only area of the UK with annual house price inflation in double figures with an average property price of £173,587.

Wales (up 7.9 percent with an average price of £220,689) and the South West (up 8.4 percent with an average price of £307,750) have seen the sharpest slowdown of annual growth (from 11.5 percent and 10.7 percent respectively). This is notable as both were key hotspots of house price inflation during the pandemic, suggesting previous drivers of the market such as the race for space and heightened demand for rural living are now receding.

Scotland has also seen its pace of annual house price inflation continue to slow, now at 6.5 percent (from 7.4 percent) with a typical property now costing £203,132. House prices in Northern Ireland are up 9.1 percent year-on-year, easing back from 9.7 percent last month, with an average property price of £185,097.

The pace of annual property price inflation also slowed in London, which continues to lag the other UK regions and nations. House prices have risen 5.2 percent over the last 12 months, down from 6.6 percent. However, the average property price in the capital remains well above the UK average at £549,160.

Iain McKenzie, CEO of The Guild of Property Professionals, said: “Today’s figures confirm what the industry has been seeing on the ground – house prices are falling, but not at the dramatic rate we might have expected after the recent economic upheaval. 

“It’s important to keep a sense of perspective and remember that property prices soared massively during the pandemic, meaning that these decreases are minor in comparison. The average home is still worth £45,000 more than it was in March 2020.  

“The limited supply of housing is one of the main factors keeping the reins on falling prices. The unprecedented demand we have seen in the last couple of years has meant that estate agents have been scrambling to replenish their stock.

“The cost of living crisis will be the determining factor to control house prices in the months ahead. Mortgage affordability, as well as living costs, will affect how confident buyers are when it comes to committing to buying a new home. 

“With nearly one in three property purchases ‘needs-based’ due to changing personal circumstances, the market will not grind to a halt, but pricing for market conditions will be paramount to achieve a sale as the market swings back in the favour of buyers.”

Tom Bill, head of UK residential research at estate agent Knight Frank, said: “Even as the financial pain becomes less acute in coming months, we expect it to become more widespread as more favourable mortgage offers made before the mini-budget lapse.

“This should take house prices back to where they were in the summer of 2021, erasing around half of the 20 percent gain they made during the pandemic.”

Managing director of Midlands-based estate agent Barrows and Forrester, James Forrester, said: “It’s important we view recent declines in context, as we are now merely starting to see a return back to pre-pandemic norms.”

Jason Tebb, chief executive officer of property search website said: “All the upheaval – the macro-economic challenges and the chatter around fixed-rate mortgages, which although edging downwards are higher than we have grown used to – will inevitably impact the confidence of the average property-seeking consumer.

“However, people move for many different reasons and that’s not going to change, even if conditions are more challenging.”

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