In the month of September, the United Kingdom witnessed a modest 0.4% decline in the average residential property price, settling at £278,601. This decline marks the sixth consecutive month where a decrease in property values has been observed. Notably, this downturn is less severe when compared to August, which saw a more substantial 1.8% decrease in property prices relative to the preceding month.
Industry stakeholders and experts have offered their insights on this market development:
Sam Mitchell, CEO of Purplebricks, remarked, "The data from Halifax represents a lag indicator, and the actual situation on the ground portrays a notable shift in sentiment toward the housing market. Recent weeks have witnessed a significant transformation, primarily driven by lower-than-expected inflation and the unexpected decision by the Bank of England to maintain interest rates. Instead of the typical seasonal slowdown, we are observing an increase in both properties entering the market and prospective buyers actively viewing and making offers. It is evident that the reduction in mortgage rates is bolstering consumer confidence, encouraging the revival of housing searches that had previously been paused. This momentum is anticipated to persist throughout October. For tenants, the decrease in rates brings respite from exorbitant rents, while for first-time buyers, the prospect of homeownership becomes more attainable."
Fred Jones, COO at Upstix, expressed concerns, stating, "Persistent inflation has led many to anticipate prolonged higher interest rates. Homeowners holding out for more affordable mortgages and a swift recovery in market demand may face disappointment. Given the time it takes for rate increases to manifest in the market, property owners should prepare for potential challenges. Sellers, in particular, should be wary as prolonged low demand increases the risk of transactions collapsing and disrupted property chains. Timing is critical for those aiming to avoid further depreciation in property values."
Verona Frankish, CEO of Yopa, commented, "Today's buyers are encountering increased challenges in their quest to climb the property ladder, reflected in the recent reduction in mortgage market activity. As a result, the UK property market presently experiences a plateau in house price growth, with minimal month-to-month fluctuations. Prices continue to remain below the peak levels observed at this time last year. Nevertheless, the cessation of rising interest rates, albeit at their highest levels since the spring of 2008, is anticipated to enhance buyer sentiment in the coming months. Overall, the property market has exhibited resilience in the face of wider economic fluctuations and is expected to remain stable for the remainder of the year."
James Forrester, MD of Barrows and Forrester, offered perspective, saying, "While a sixth consecutive monthly decrease may appear concerning, the market is currently undergoing an adjustment phase following an extended period of surging property prices that reached record highs. This adjustment manifests as a gradual and steady reduction in property values, as opposed to a precipitous decline as predicted by some. It is worth noting that despite this moderate decline, property values remain significantly higher compared to the pre-pandemic benchmark."
Nathan Emerson, CEO at Propertymark, analyzed the situation, noting, "The 4.7% decline in house prices, accelerating from August's 4.5% drop, can be attributed to the impact of higher interest rates on mortgage affordability. Additionally, the expectation of prolonged high base rates will continue to exert pressure. This underscores the imperative for both the Bank of England and Rishi Sunak to expedite a reduction in inflation to 2%. Failure to do so could make 2024 a challenging year for prospective homebuyers."
Iain McKenzie, CEO of The Guild of Property Professionals, acknowledged the situation, stating, "The decline in house prices during the customary summer slowdown is unsurprising, especially amidst ongoing financial constraints. The Bank of England's unexpected decision to maintain the base rate at 5.25% brought relief to mortgage-dependent buyers; however, it remains notably higher than the previous year. This has prompted many potential buyers to adjust their expectations and hold firm during price negotiations with sellers. While affordability remains a concern, the pause in base rate hikes and competitive mortgage rate reductions signal a stabilization of the market. Despite financial constraints, there remains robust demand for high-quality housing. Buyers have adapted to the higher-rate environment, and sentiment is expected to improve further if interest rates remain steady."
Tom Bill, Head of UK Residential Research at Knight Frank, offered insights, saying, "The correction in house prices resulting from rising interest rates was anticipated, although the extent of recent market volatility was less expected. The combination of the recent fiscal measures and a sequence of consecutive interest rate increases has impacted demand. Nevertheless, there is optimism that both buyers and sellers will return in greater numbers as a sense of stability is restored. The financial impact will persist into the next year as individuals transition from fixed-rate deals, but a positive shift in sentiment is expected, a crucial factor for the housing market. Therefore, it is our belief that most of the UK's house price correction will occur within this year, with modest single-digit annual growth returning after the next general election."
Nicky Stevenson, MD at Fine & Country, provided further insights, stating, "Pressured buyer affordability is contributing to a reduction in house prices, although they still remain significantly higher than pre-pandemic levels. The property market currently offers a greater supply of homes compared to the frenetic activity of 2021, providing buyers with more choices and room for negotiation during price discussions with sellers. The unexpected pause in base rate hikes may lead to an upswing in demand, potentially balancing out the price decline in the coming months. Autumn typically sees an uptick in activity; however, with the average sale taking nearly 20 weeks to finalize, time is of the essence for those aiming to relocate by Christmas. Sellers can take solace in the knowledge that motivated buyers exist, albeit budget-conscious and cautious not to overextend themselves."
Jason Tebb, CEO at OnTheMarket.com, remarked, "The sustained decline in average property prices is a consequence of the high cost of living and the numerous rate hikes, impacting the capacity and willingness of buyers to make substantial purchases. Despite economic uncertainties, the market exhibits a surprising degree of stability as it enters a typically busier period leading up to Christmas. The decision to maintain interest rates in September has bolstered stability and buyer confidence, with many borrowers hopeful that we have reached the peak of the base rate and that the worst is behind us. While there may be fewer buyers compared to the period of the stamp duty holiday, those who are active are determined and focused on moving. They are price-sensitive, and sellers must be judicious in their pricing to facilitate timely sales."
Jonathan Hopper, CEO of Garrington Property Finders, noted, "The correction in British property prices is ongoing, though there are indications of a gradual easing. The data from Halifax is the second house price index this week to report a deceleration in monthly price declines. Sellers are increasingly recognizing the market's shift from last year, with a 4.7% decline in prices and the average home selling for £14,000 less than the peak observed in August. Realistic pricing is becoming the norm, but there are still instances of homes selling well below their asking prices as determined buyers assert their bargaining power. The key question now revolves around how the moderation in mortgage rate increases will influence both prices and sales volumes. While substantial reductions in mortgage costs are not anticipated, the lowering of fixed-rate deals offers hope that the peak is in the past. Cash buyers maintain a strong position, yet affordability is gradually improving for mortgage-reliant buyers as prices continue to decrease. With robust wage growth, improved affordability should stimulate demand in the months ahead, even though buyers remain vigilant of price risks and higher borrowing costs."
Article from https://propertyindustryeye.com/property-industry-reacts-to-another-drop-in-uk-house-prices-4/