House prices in the UK have recorded a seventh consecutive monthly decline, with prices down 3.1% year-on-year in March, Nationwide’s house price index for March has shown.
This represents the largest annual drop since July 2009. All regions saw a slowdown in price growth in Q1, and most experienced small year-on-year falls.
The West Midlands emerged as the strongest performing region, while Scotland remained the weakest.
According to Nationwide’s chief economist, Robert Gardner: “March saw a further decline in annual house price growth, with prices down 3.1% compared with the same month last year. March also saw a further monthly price fall (-0.8%) – the seventh in a row – which leaves prices 4.6% below their August peak (after taking account of seasonal effects).”
Gardner attributed the downturn to financial market turbulence following the mini-Budget last year.
Since then, activity has remained subdued, with the number of mortgages approved for house purchase at 43,500 cases in February, nearly 40% below the level seen a year ago.
The housing market is unlikely to regain much momentum in the short term, as consumer confidence remains weak and household budgets are strained by high inflation.
Additionally, housing affordability is stretched, with mortgage rates considerably higher than the lows seen at this time last year.
House price growth slowed in all UK regions in Q1. Nine out of 13 regions recorded annual house price declines. Scotland was the weakest performing region, with prices down 3.1% compared with
a year ago, a sharp slowing from the 3.3% year-on-year increase the previous quarter.
East Anglia, which was the strongest performing region last quarter, saw a significant slowdown, with prices falling 1.8% year-on-year, making it the weakest performing English region. The neighbouring Outer South East saw a 1.5% year-on-year decline, while London experienced a 1.4% fall.
The West Midlands was the strongest performing region, with prices up 1.4% compared with a year ago.
Across northern England overall (which comprises North, North West, Yorkshire & The Humber, East Midlands, and West Midlands), prices were flat compared with Q1 2022. Meanwhile, southern England (South West, Outer South East, Outer Metropolitan, London, and East Anglia) saw a 1.1% decline.
Northern Ireland witnessed a noticeable slowing in annual house price growth, although prices were still up 1.3% year-on-year. Meanwhile, in Wales, annual house price growth slowed from 4.5% to -0.7%.
As house prices continue to decline and market activity remains subdued, the outlook for the UK housing market in the near term remains uncertain.
Factors such as weak consumer confidence, high inflation, and stretched affordability are expected to continue to impact the market’s recovery.
Reaction
Nicky Stevenson, managing director at national estate agent group Fine & Country:
“March’s fall in house prices is not unexpected, but all signs point to this motivating buyers as the housing market starts gearing up for the traditionally busy Easter period.
“An early indication came from the Bank of England this week as mortgage approvals in February rose for the first time in six months.
“There is no reason to think this is a blip either, as despite the latest base rate rise from the Bank of England, mortgage lenders are still cutting their rates — and this will only provide further encouragement that now is a good time to move home.
“Sellers are being realistic about the level they market their home at, and these lower prices are in turn incentivising buyers to start viewings.
“While one of the biggest drivers behind price growth in the last two years has been the limited supply of homes, stock levels are increasing, which is providing more space for price negotiations.”
Tomer Aboody, director of property lender MT Finance:
“With the Kwarteng Budget and macro-economic climate affecting interest rates and inflation, low confidence in the housing market was inevitable.
“Buyers and sellers paused or withdrew from purchases as rates soared. With a combination of the higher cost of living and in some cases rates at four or five times what they had been, it wasn’t surprising that there was out-and-out panic.
“As we are now seeing more stability in Swap rates, which is leading to more confidence , the market is hopeful of a better second quarter.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Although these figures show house price growth is still slowing, we have seen signs of improvement over the last few months at the sharp end.
“Clearly the rise in mortgage rates and cost of living continues to weigh heavily. However, buyers have been tempted back by more choice and less competition compared with much of 2021 and 2022 as the balance between supply and demand improves.
“If anything, the passage of time has made the reasons for moving more compelling but buyers and sellers want to ensure they are not caught out financially so are trying to negotiate best possible terms, which has led to some price softening.”
James Briggs, head of personal finance intermediary sales at specialist lender at Together:
“Continuing the downward trend, house prices fell again this month by 0.3%.
“With double-digit inflation holding firm, and the further rise in interest rates; factoring in mortgage repayments will continue to be front of mind for most households, particularly those on variable rates.
“However, there could be better times ahead. With both the Prime Minister and BoE’s Andrew Bailey predicting a sharp drop in inflation by the end of the year, first-time buyers may find there are increasing buying opportunities in the coming months as prices dip further. The same goes for BTL, with falling house prices expected, there will be ample opportunities for landlords to assess and seize additional properties to boost their portfolios.
“For anyone in the position to push on with property purchases now, it is a good to consider a specialist lender who can consider your personal and financial circumstances on a case-by-case basis.”
Nick Harris, co-founder at Wokingham-based Quarters Residential Estate Agents:
“Interestingly, our local market appears to be shifting in favour of the seller again. Buyers are coming out of their winter — and post-mini Budget — hibernation, confidence is returning and multiple offers are being received on a number of newly launched properties. Supply and demand are balanced for the first time in a long time but with many owners wishing to make the most of the spring market, and typical pre-pandemic seasonality returning, we’re expecting to see a jump in the number of available properties. Last week’s base rate rise appears to have had little impact, with mortgage rates continuing to trickle down and those buyers with compelling reasons to move still actively viewing. Locally, asking prices have reduced by circa 5% and appear to have settled at that level. Given the recent surge in buyer activity, it’s unlikely we’ll see further reductions unless there is another interest rate increase that is not already priced into the mortgage market.”
Daniel Field, managing director of North East-based mortgage broker, The Mortgage Dog:
“While higher interest rates have certainly put the property market under pressure, on the whole committed buyers have shown real resilience and have continued pursuing their house purchases even in the face of changing market conditions. The pace at which mortgage rates rose following the mini-Budget definitely caused some real concern among borrowers, but since the New Year mortgage rates have been steadily coming down and people have adjusted to the new normal. And that normal is no longer two-year fixes of circa 1%-2%. With proper financial planning, many homeowners and prospective buyers are still managing to successfully navigate the higher borrowing rates we have today and are still achieving their property goals. The collapse in demand and astronomical house price drops some predicted simply haven’t materialised.”
Connor Harris, Co-founder at Southampton-based estate agents, Marco Harris:
“The housing market is currently buoyant enough to see sales being agreed, but there is a correction in prices due to various factors. The recent BOE base rate increase, high mortgage rates, and lower affordability and confidence levels among buyers are contributing to this trend. While the supply of homes on the market remains steady, marketing and strategy are essential in achieving a sale at or near the asking price. With the current correction in prices, it’s crucial to highlight the unique selling points of the property and reach out to potential buyers who are willing to pay a fair price. Employing effective marketing techniques, such as staging the home, professional photography, and targeted advertising, can make all the difference in attracting the right buyer and achieving a successful sale.”
Jamie Alexander, director at Southampton-based Alexander Southwell Mortgage Services:
“The property market is under real pressure and the stubborn inflation we have, remaining above 10%, won’t help. Mortgage rates have come down noticeably in the first three months of the year but there’s still a lot of uncertainty among consumers.”
Kundan Bhaduri, director of London-based property developer and portfolio landlord, The Kushman Group:
“Towards the end of this year, both inflation and interest rates will have come down, and inflation significantly so. This will serve the property market well and support dermand as sentiment improves and the cost of borrowing comes down. Many sellers have definitely been nervous about selling in 2023 to date, while landlords, for a multiplicity of reasons, are nervous about buying or are even exiting the market. However, market sentiment is far from depressed. The cost of UK property is still higher than at the start of 2022 and more than 11% more than the start of 2021. For most home buyers, the best time of year to look at buying a home is in the Spring. As a professional buyer, my advice would be to start looking for your next house now, as the process of buying a house can take anywhere between three to six months and often buyers want to wrap everything up and be in their new home by Christmas.”
Riz Malik, director of Southend-on-Sea-based R3 Mortgages:
“The market appears to be in a perplexing limbo, almost as if it is waiting for an epiphany. Many will have a moment of clarity after the Easter break, allowing them to chart their future course in this unpredictable landscape. A dash of optimism in the form of falling inflation or a promising interest rate outlook could be the spark that ignites the market. As for 2023, I haven’t given up hope on it yet. It could still surprise us all.”
Austyn Johnson, founder at Colchester-based Mortgages for Actors:
“The doom-mongers have been proved wrong. Demand for property and mortgages has been really strong in the first quarter of the year and we have not slowed down. If there’s one trend I’m definitely beginning to see, it’s a bit more debt consolidation.”
Louis Mason, director of London-based mortgage broker, Oportfolio:
“Though prices are coming down, demand for property in recent months has been surprisingly strong, specifically from first-time buyers, supported by the fact that many sellers are being more realistic with their asking prices and the jobs market is holding up. Lower prices are stimulating demand and reigniting the market.”
Will Rice, CEO of residential mortgage lender, Generation Home:
“We expect house prices to stabilise throughout 2023. The majority of the correction has already happened, and while there may be a little room left to fall, it won’t be much. Inflation will be the key driver of the housing market in the near future. It will determine what the Bank of England decides to do with the base rate, which will directly pass through to mortgage rates and housing costs, which in turn will affect the level of demand from buyers, determining house prices. If you’re in the financial position to be able to buy, now could be a good time to be in the market. If prices do stabilise throughout the year, we might see demand increasing and more properties listed, creating competition between buyers.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Average property prices fell again in March as higher mortgage costs, along with the rising cost of living, have an inevitable impact on affordability and how much buyers are able to spend.
“Swap rates, which underpin the pricing of fixed-rate mortgages, remain incredibly volatile but the good news is that the general direction of fixed-rate mortgages continues to be downwards, with some of the bigger lenders back in the sub-4 per cent five-year fixed-rate space.
“Borrowers should seek advice from a broker to ensure they get the best deal in more challenging market conditions.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“With the largest annual decline in house prices since the depths of the financial crisis, homeowners may be worried about what this means for them.
“Unlike the financial crisis, we haven’t seen an aggressive drop-off in transactions, so the slowdown in prices has hardly been the crash that was expected.
“Sellers are becoming more open to negotiating with buyers on the asking price and that has the potential to skew the data.
“While we are forecasting an overall decrease of around 8% this year, this would only bring house prices in line with levels back in 2021.
“Confidence is returning to the property market following the fallout of the mini-Budget last September and we should expect further improvements, so long as inflation is brought under control this year.
“First-time buyers are being reassured by lenders, as the number of mortgage approvals recently saw the first monthly increase since August last year.
“The high cost of living remains the greatest barrier to home ownership in this country. Inflation levels continue to squeeze households and prospective buyers will need to tighten their purse strings even tighter from next month, as Government support on energy bills is withdrawn.”
Sarah Coles, head of personal finance at Hargreaves Lansdown:
“The house price slip has become a slump, with the biggest annual price drop in 14 years. The pace of descent accelerated, and we’re already almost 5% below the peak in August. Unfortunately, the indications for the future aren’t looking terribly promising either.
“Buyers have been broken by rampant inflation, jacked-up mortgage rates, a stagnating economy, and the threat that there could be worse to come. RICS figures for February showed that buyer demand fell again – for the tenth consecutive month. Buyer enthusiasm is likely to have been dampened even further by the fact the gradual fall in mortgage rates stalled in March. At the end of February, according to Moneyfacts, the average two-year deal was at 5.32%, and by the 30 March it had risen very slightly to 5.38%.
“As a result, sellers are having to compromise in order to shift their properties. RICS says that 60% of homes worth up to £500,000 are selling for less than the asking price, and Zoopla found that 40% of home sellers are cutting their prices even before a seller comes along – by an average of 4.5%.
“There is a glimmer of hope on offer from the mortgage market. The bump in rates is likely to be a temporary blip, due to inflation coming in higher than had been expected. As we get further into the year, we’re expecting inflation to fall significantly, so we may well see rates on the way down again. Already February saw a very small pick up in the number of mortgages approved for the coming months. However, it’s still less than half the numbers we were seeing two years earlier, so you need to look very closely to see any real hope in these figures.
“It’s easy to read these figures as the start of a slippery slope, where price drops start gradually and then accelerate. We can’t yet rule out the chances of a gradual drift south and a softer landing, but it’s looking increasingly unlikely.”
