UK residential property prices have experienced a 3.1% decrease, marking the most significant decline since July 2009. For seven months in a row, house prices have been on a downward trend. In March, prices fell at a faster rate than in February, dropping 0.8% in just one month compared to February’s 0.5% decrease. The average house price now stands at £257,122, which is 4.6% below the peak of £273,751 in August.
Sarah Coles, head of personal finance at Hargreaves Lansdown, says: “The house price decline has deepened, with the largest annual price drop in over a decade. The rate of descent has accelerated, and we’re already almost 5% below the peak in August. Unfortunately, the future outlook is not very promising. Buyers are struggling with soaring inflation, rising mortgage rates, a stagnant economy, and the possibility of further challenges ahead. RICS data from February revealed that buyer demand dropped for the tenth consecutive month. Buyer enthusiasm has likely been further dampened by the fact that mortgage rates did not continue to fall in March. According to Moneyfacts, the average two-year deal increased slightly from 5.32% at the end of February to 5.38% on 30 March.
As a consequence, property sellers are having to make compromises to sell their homes. RICS reports that 60% of properties worth up to £500,000 are selling for less than the asking price, and Zoopla found that 40% of home sellers are reducing their prices even before a buyer appears – by an average of 4.5%.
There is a small ray of hope from the mortgage market. The increase in rates is likely a temporary hiccup due to higher-than-expected inflation. As we progress through the year, we anticipate inflation to drop significantly, potentially leading to lower mortgage rates. February witnessed a slight increase in the number of approved mortgages for the upcoming months. However, this figure remains less than half of what it was two years ago, meaning any optimism in these numbers must be tempered.
While it may be tempting to view these statistics as the beginning of a slippery slope where price drops start slowly and then accelerate, we cannot entirely dismiss the possibility of a gradual decline and a softer landing. However, it is increasingly appearing less likely.”
Nathan Emerson, CEO of Propertymark, the UK professional body for estate agents, commented on Nationwide’s House Price Index published today, Friday 31 March: “Our member agents report stable transaction levels year on year, and listings of new properties coming to the market are steady. With a continuous flow of serious buyers eager to move and prices still higher than the same period last year, sellers remain in a strong position to sell. However, they can no longer push for higher prices as seen last year. Instead, they must reduce their asking prices or be open to offers to achieve a more realistic and efficient sale.”
Nationwide has published its House Price Index for March 2023: House prices record seventh consecutive monthly decline in March
