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Significant Decline in House Prices: Is Now the Time to Hit Pause?

House prices have seen a sharp decline in August. Data from Halifax reveals that prices plummeted by 1.9% in the month and have dipped 4.6% annually up to August. This marks the steepest annual decrease since the financial downturn of 2009.

The current average cost of a house stands at £279,569, representing a reduction of £14,000 from its previous high. While this shift is considerable, it is worth noting that the value merely reverts to the figures seen in 2022. Moreover, house prices still hover at an impressive £40,000 above the rates observed before the global pandemic hit.

Interestingly, the most significant reductions are concentrated in Southern England and Wales. The South East, in particular, is witnessing a drop of 5% in house prices.

Nathan Emerson, CEO of Propertymark commented:

“House prices are thankfully adjusting to more sensible levels alongside increases to people’s earnings and the number of properties selling below asking price is increasing, offering homebuyers the opportunity to negotiate. These factors are all playing a part in increasing homebuyers’ affordability and softening the blow of rising interest rates.

However, despite how this may look on the face of things, sellers are rightly still motivated to sell as they continue to make a healthy gain on their property price.”

Nicky Stevenson, Managing Director of Fine & Country, commented:

She said: “The rise in borrowing costs combined with traditional summer slowdown have put the brakes on house price growth, although average prices remain well above pre-pandemic levels.

The number of properties available for sale remains constrained compared to 2019, which was a fairly typical year for the housing market. This is playing a part in preventing bigger falls in prices even though affordability is tight.

While demand has slowed over the summer, this matches normal seasonal patterns and is expected to build again as we head into autumn.

Mortgage lenders are competing for business again and bringing down their mortgage rates accordingly, which will ease pressure on home-buyers and will further prop up demand over the coming months.

If a pause in base rate rises does materialise this year, this should further boost buyer confidence.”

Managing Director of House Buyer Bureau, Chris Hodgkinson, commented:

“Buyer indecision continues to dampen market sentiment, with the majority still unwilling to borrow the sums required to satisfy seller expectations. As a result, property values have continued to level out as predicted and this will remain the case until a middle ground is reached.

For sellers, this means a further adjustment where their asking price expectations are concerned if they want to secure a buyer. However, the required adjustment is marginal in comparison to the house price increase they will have enjoyed over the last few years.”

Kate Steere, deputy editor and mortgage expert at personal finance comparison site, commented:

“It’s extremely concerning to see another significant decline in house prices during August. The UK housing market is currently at risk of a crash, and with another base rate hike largely expected at the end of this month, house prices are set to take another hit.

The recent growth in UK wages along with lower house prices should be a perfect combination for those looking to buy, but the benefits of these conditions are currently offset by the extremely high mortgage rates we’ve seen over the last 12 months. The threat of significantly higher monthly payments has knocked buyer confidence, and created a downward spiral in housing prices.

I’m hopeful that we are nearing the peak of interest rate rises, and following the announcement in September, the Bank of England might look to pause rate hikes moving forward. This would allow the market room to breathe and begin to restore some buyer confidence. However, until this happens, I expect that house prices will remain low.”

Halifax has published its house price index for August: august-2023-house-price-index.pdf (