More evidence this week that UK house prices are well and truly on the way down.
Biggest decline since 2009.
House prices in August were 5.3% lower than a year earlier. It is the biggest annual decline since July 2009 as higher interest rates cooled demand, mortgage lender Nationwide said on September 1.
Prices dropped by 0.8% in August alone, the largest monthly fall since March. This followed a 0.3% decline in July, Reuters reported.
“Well below pre-pandemic levels.”
“The softening is not surprising, given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels,” Nationwide Chief Economist Robert Gardner said.
The Bank of England has raised interest rates 14 times since December 2021 to 5.25%. Financial markets expect another rate increase this month to 5.5%.
Mortgage approvals 20% down.
Mortgage approvals had been running around 20% below 2019 levels. This trend looks likely to continue, says Gardner.
Nonetheless, Nationwide expects a “soft landing” for the housing market as it predicted unemployment would not rise above 5% and wages were growing fast in nominal terms.
House prices surged.
Before they peaked in September 2022, British house prices surged more than 25% since the start of the COVID-19 pandemic. Greater demand for living space, previously low interest rates and temporary tax incentives boosted demand.
Economists and industry experts believe house prices could fall another 5% before they recover.
Maybe the bottom of the market is not far away when entrepreneurs can buy in.
