UK house prices record first annual fall since December 2012

UK house prices registered the first annual contraction in additional than a decade in May as potential patrons have been hit by greater mortgage charges, based on the lender Halifax.

Property prices have been 1 per cent down final month in contrast with May 2022, the first annual fall since December 2012, information confirmed on Wednesday.

This comes because the Royal Institution of Chartered Surveyors warned on Thursday that expectations about additional rate of interest rises are doubtless so as to add downward strain in the marketplace within the months forward.

Tarrant Parsons, an economist at RICS, mentioned “storm clouds are gathered”, with stubbornly excessive inflation prone to immediate the Bank of England to take “further action through interest rate rises, leading to higher mortgage rates and ultimately reducing affordability and buyer demand”.

Higher rates of interest may damp the optimistic development that led the RICS house worth index to enhance to minus 30 in May from a current low of minus 46 per cent in February. The survey measures the distinction between the proportion of surveyors seeing rises and falls in house prices.

The BoE mentioned the typical fee for brand spanking new mortgages rose to 4.5 per cent in April, the best since 2008. Markets count on the central financial institution to lift rates of interest once more on the subsequent financial coverage assembly on June 22 — from 4.5 to 4.75 per cent — and are pricing in a transfer above 5 per cent by the tip of the 12 months.

“This will inevitably impact confidence in the housing market as both buyers and sellers adjust their expectations,” mentioned Kim Kinnaird, director at Halifax Mortgages, who additionally expects “further downward pressure on house prices”.

Tom Bill, head of UK residential analysis at Knight Frank, forecasts that prices will fall by about 5 per cent this 12 months as “mortgage rates will keep edging up as wage growth keeps core inflation stubbornly high”.

However, he famous that not like throughout the monetary disaster in 2008-09, the fall in prices can be restricted by rising wages, low unemployment, longer mortgages and financial savings amassed throughout the Covid pandemic.

Halifax reported that common property prices had fallen by about £3,000 throughout the previous 12 months and have been down about £7,500 from their peak in August. However, prices have been nonetheless £5,000 up since the tip of final 12 months, and £25,000 above the extent of two years in the past, reflecting the pandemic increase.

The annual drop was pushed by present homes and flats, each down 1.9 per cent, based on Halifax. Terraced and semi-detached homes registered a smaller drop at 1 per cent and 0.5 per cent, respectively, whereas prices of indifferent homes have been marginally up by 0.4 per cent.

Southern England was the worst-performing space, with the South East, the South West and Greater London reporting annual contractions of 1.6 per cent, 1.4 per cent and 1.2 per cent respectively. Instead, the West Midlands continued to be one of the best performing area with an annual enhance of 2.7 per cent.

Earlier this month, the mortgage supplier Nationwide reported UK house prices falling by an annual fee of 3.4 per cent in May, the most important drop since 2009. 

Myron Jobson, senior private finance analyst at funding platform Interactive Investor, mentioned: “The mortgage affordability squeeze not only impacts the dreams of aspiring homeowners but also reverberates throughout the housing market.”

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