House prices fell by 0.3% in April, marking the first dip after three months of consecutive growth, according to the latest report from Halifax.
Despite the dip, the market is showing signs of stability, particularly in the first-time buyer sector, due, in part, to rising rental costs.
The typical UK property now costs £286,896, compared to £287,891 in March. Despite the monthly fall, this figure is still approximately £28,000 higher than two years ago, but around £7,000 below last summer’s peak.
Kim Kinnaird, director at Halifax Mortgages, said, “After three consecutive months of growth, the average UK house price fell in April, down by -0.3% or around £1,000 over the month. The rate of annual house price inflation also slowed further to +0.1%, from +1.6% in March, meaning average property prices are largely unchanged from this time last year.”
Despite the dip in prices, Kinnaird highlights that the market remains resilient. “The economy has proven to be resilient, with a robust labour market and consumer price inflation predicted to decelerate sharply in the coming months. Mortgage rates are now stabilising, and though they remain well above the average of recent years, this gives important certainty to would-be buyers.”
However, Kinnaird also acknowledged the real concerns many households face with the rising cost of living. “Combined with the impact of higher interest rates gradually feeding through to those re-mortgaging their current fixed-rate deals, we should expect some further downward pressure on house prices over the course of this year.”
Notably, the first-time buyer market is proving resilient, with average property prices up +0.7% over the last year. Kinnaird suggested that “with rents continuing to rise sharply, it’s becoming increasingly cost effective to purchase a home, despite the challenge of raising a deposit and higher mortgage borrowing costs.”
A regional analysis shows a mixed picture. All regions and nations across the UK saw the rate of annual property price inflation remain in positive territory during April, except for the four regions of southern England, where average house prices fell over the last year. The South East registered the largest dip (0.6%, average house price of £387,469).
The West Midlands posted the strongest annual growth of +3.1% (average property price of £249,554). Northern Ireland (+2.7%, £186,846), Scotland (+2.2%, £201,489) and Wales (+1.0%, £216,559) also saw average property prices increase year-on-year.
Reaction
Jonathan Hopper, CEO of Garrington Property Finders:
“The market hasn’t yet turned a corner, but at least the fog of uncertainty is lifting.
“The number of homes changing hands is still well down on what it would typically be in spring, but demand is improving as buyers who sat on their hands over winter come out of the woodwork.
“The recovering mortgage market – which saw mortgage approvals jump to a five-month high in March – gives a good sense of how things are stabilising.
“Sentiment is improving steadily, and the mood among many buyers has shifted from anxiety to cautious confidence. While everyone is still wary of overpaying, committed buyers are focusing less on how prices might move in the next month or two and more on how to use their strong hand to secure a sizeable discount now.
“Supply is notching up too. While the number of new-build homes being completed has slowed, a steady stream of former rental properties is coming onto the market, and the rebalancing of supply and demand has helped prices settle.
“However with a further interest rate rise likely to be on the cards when the Bank of England’s rate-setting committee meets later this week, many first-time buyers could see affordability slip further out of reach as prices pick back up.
“But many wealthier buyers, who tend to be less reliant on mortgage borrowing, and those with a good chunk of equity under their belts, are coming to see the market’s new-found, froth-free equilibrium as a good time to buy.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Contrary to other recent housing market surveys, these figures show we cannot be complacent about recovery as cost-of-living and mortgage worries persist, which are making buyers cautious about longer-term commitments unless they see real value.
“However, there is no doubt that we are much busier than we were a few months ago and the underlying feeling is that we are over the worst and will continue on a relatively even keel despite some ups and downs along the way.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“The recent rise in Swap rates, which underpin the pricing of fixed-rate mortgages, has resulted in lenders removing their market-leading lower loan-to-value products, with the main players increasing pricing by 0.30%. However, Swaps have since plateaued and have been edging downwards again so if this trend continues, we expect to see a return of 5-year fixes at sub-4%, which will be a boost to buyers.
“First-time buyer numbers continue to prove resilient and with lenders returning to higher loan-to-value products, this will assist those struggling o get on the housing ladder.”
Chris Barry, director at Gloucester-based conveyancer, Thomas Legal:
“As it often does, the Halifax house price index contrasts with that of the Nationwide, which showed a 0.5% increase in prices in April. Either way, sentiment on the ground is improving by the day.
“There seems to be an acceptance among buyers that mortgage rates won’t come down much further and that now is as good a time as any to buy. In addition, rents are increasing and in some scenarios mortgage payments are cheaper than rents. I don’t see a decline in registering buyers in May, even with the likely Bank of England rate rise this week. Property prices are holding up, banks have an appetite to lend and unemployment is still relatively low.”
Jamie Minors, managing director at Norwich-based estate agents, Minors & Brady:
“Though the annual rate of house price growth is near flat, at 0.1%, the market is not. With mortgage rates having steadily reduced during 2023 to date and consumer confidence returning after the disastrous mini-Budget, we are seeing strong levels of demand matching good levels of supply.
“Unemployment is still very low, so as long as mortgage rates don’t suddenly rise and people keep their jobs, buyers will continue to purchase, resulting in prices holding without further big reductions and a rally upwards in 2024. As ever, the property market is proving more resilient than many thought.”
Kim McGinley, director at Lee-on-the-Solent-based Vibe Specialist Finance:
“Prices may have dipped slightly but we appear to be witnessing a correction rather than a crash. After the mini-Budget, confidence in the property market fell sharply but in the first four months of 2023, sentiment steadily improved as mortgage rates came down and the economic outlook felt less bleak. The significant increase in mortgage approvals for house purchase in March reflects the improved sentiment on the ground and the fact that people have accepted the new rate environment and are getting on with their lives. Even another increase in the bank base rate this week may not slow the recovery we’re seeing in mortgage activity and the broader property market.”
Kevin Dunn, mortgage and protection adviser at Leicester-based financial planner and mortgage broker, Furnley House:
“Prices may have fallen slightly in April, according to the Halifax, but last month we saw mortgage approvals bounce back sharply despite base rate increases and stubbornly high inflation. The reason for this is that buyers have now adjusted to the higher interest rate world and there is also a lot more confidence in the economy. This will likely continue despite the prospect of another rate rise this week. The property market is proving more resilient than many thought.”
Riz Malik, director of Southend-on-Sea-based independent mortgage broker, R3 Mortgages:
“Numerous lenders have recently adjusted their affordability calculations to account for elevated interest rates, subsequently impacting the potential borrowing amounts. This will continue to dampen property prices for the time being at least.
“However, with Skipton returning with a 100% loan-to-value mortgage, this could stimulate the lower rungs of the property ladder, potentially creating a ripple effect that extends upward. Pairing this development with a timely stamp duty holiday may provide the market with the necessary buoyancy to see us through until the end of the year when we could potentially witness a reversal in interest rate hikes.
“The property market eagerly awaits a boost to break free from this seemingly perpetual cycle reminiscent of Groundhog Day.”
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco:
“The sudden demise of the property market has been predicted time and time again, and the doom-mongers are set to be confounded once again this year. Whilst the pace of growth has already dramatically slowed, which is to be welcomed, prices have not fallen, and will not, by some of the sensational levels predicted.
“After the shambolic administration of Truss, the markets have calmed and we are starting to see people return as they anchor themselves to the new norm of mortgage rates, react against ever-increasing rental costs, and look to buy in a somewhat softer market. The supply of property is still scarce, especially in high-demand areas, where prices are starting to edge up once more.
“With rumours abounding that the Government may well return to demand-side assistance with a new type of Help to Buy Scheme or similar, prices could be set for a recovery in the latter half of the year and certainly before a General Election.”
John Choong, equity and markets research analyst at InvestingReviews.co.uk:
“Despite weakness over the past year, the housing market may have bottomed out for several reasons. Crucially, mortgage approvals, which serve as a forward-looking indicator for future house prices, are starting to rebound from their bottom in January.
“To complement this, the RICS survey also seems to be moving in the same direction, along with GfK consumer confidence data. More importantly, mortgage rates are continuing to drop from their highs last Autumn.
“And despite the likelihood of another rate hike this week, I don’t imagine this will have a drastic impact on mortgage rates moving forward, given that cuts are already expected later this year/early next. Instead, it will be the central bank’s outlook for future hikes that the market will pay most attention to, as any hawkish statements could put some downward pressure on a potential rebound in property prices in the near term.”
Kundan Bhaduri, director of London-based property developer and portfolio landlord, The Kushman Group:
“The property market is powered by confidence and confidence is returning by the day. If inflation finally enters single digits and starts to come down in the months ahead, this trend looks set to continue. The sharp house price falls many have been predicting simply haven’t materialised, as mortgage rates have come down sharply since the fourth quarter of last year and supply is still low. What’s also helping is the fact that buyers and sellers are finally seeing eye-to-eye on pricing.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com:
“I can’t help but feel that the recent apparent rise in house prices seen by the Nationwide is a dead cat’s bounce. Whilst the economy hasn’t performed as badly as feared over the past few months, real wage growth is negative, the number of mortgage approvals are way down on this time last year, and interest rates are still rising. Oh and like a bad smell, inflation is refusing to go away.
There’s always a chance Rishi Sunak will re-deploy Help to Buy again, or some other scheme to prop up house prices. Failing that, I think they’ll fall 15% over the next 12-18 months. Which really will help people to buy.”
Nick Harris, co-founder at Wokingham-based Quarters Residential Estate Agents:
“Prices may have nudged down in April, according to the Halifax, but there’s more life in the property market than many think. While some discretionary buyers continue to sit tight, serious buyers remain very active.
“Sellers are being much more realistic on price, and are typically also buyers so they appreciate a more balanced property market. The property market armageddon some predicted is simply unlikely to materialise.”
Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions:
“The Scottish housing market appears to be remaining stubbornly bullish with an appetite and thirst for residential properties at most levels of the market seemingly unquenchable. With Home Report Values arguably more accurately reflecting current market conditions and sellers’ expectations perhaps more reasonably managed, the amount that buyers are willing or needing to offer in excess of mortgage valuations does appear to be lessening, however.
“The ongoing and persistent attacks by the Scottish government on the private rental sector alongside diminishing yields have contributed to clear signs of a slow and steady exodus of non-professional landlords from the rental market with very little or no interest in buy-to-let portfolio expansion from professional investors.
“For first-time buyers in particular, this combination is not a negative trend but one that does appear to be fuelling strong activity in that sector and allowing more of this type of buyer to secure their first home.”
Ashley Thomas, director of London-based mortgage broker, Magni Finance:
“We have seen a huge increase in enquiries over the past couple of months with more and more people looking to move ahead with purchases. March and April saw a growing number of prospective house buyers put the pedal to the floor. The property market seems to be much more positive as mortgage rates have continued to reduce over the past couple of months.”
Rich Horner, head of individual protection at MetLife UK:
“UK house prices fall as recent interest rate hikes continue to cause sellers to sit tight and await more stability across the market. However, there may be opportunities for buyers in the short-term given mortgage rates are now steadily returning to pre-mini-Budget levels and house price growth is slowing.
“Whether the decision is to stay, focus on renovations or sell this year, whatever your property plans, it’s important to make sure you’re planning ahead and for all eventualities. Ensuring you have adequate protection for your mortgage and home will give peace of mind about keeping up with mortgage repayments, should an accident or illness prevent you from working.”
Tomer Aboody, director of property lender MT Finance:
“Transaction numbers have improved as prices have slightly dipped, suggesting more confidence from buyers, while sellers are either pricing more realistically or accepting lower offers.
“With mortgage rates still volatile, although nothing like what they were in the aftermath of the mini-Budget, buyers are cautious before committing.
“First-time buyer purchases are up, coinciding with sharp increases in rents, as the realisation of the benefits of owning over renting gives them the push to take the plunge.”
James Briggs head of personal finance intermediary sales at specialist lender at Together:
“After months of subdued activity, house prices stalled in April, falling 0.3% over the past month.
“With lenders adjusting their offers ahead of the Bank of England’s interest rate announcement this Thursday, consumer confidence appears to be remaining weak. However, as we delve further into spring, home renovations are beginning their popular, annual revival so borrowers will be eagerly assessing their options.
“First-time buyers and homeowners keen to begin their spring renovations shouldn’t necessarily be discouraged by the economic conditions. For homeowners, specialist lenders can offer second charge mortgages which are becoming increasingly popular when it comes to financing home improvements. For first-time buyer’s there are a range of schemes on offer, such as shared ownership or right to buy mortgages to support that first step onto the property ladder.
“Assessing all options including specialist brokers and lenders, who take into account your personal and financial circumstance whilst often being more flexible can help borrowers secure the finance needed to achieve their home ambitions.”
Nicky Stevenson, managing director at national estate agent group Fine & Country:
“Annual house price growth slowed in April, as sellers are proving increasingly realistic about the current economic picture and are pricing their properties accordingly.
“However, there are signs that lower prices and better negotiation prospects for buyers is leading to a resurgence in activity, with mortgage approvals rising significantly in March.
“People have accepted higher interest rates as the new normal, and buyers are also greatly benefiting from increasing levels of stock, which gives them much more choice over where they would like to live.
“The market overall has put in a strong showing so far this spring, but stubbornly high inflation makes another increase in the base rate more likely this week.
“Lenders are starting to marginally up mortgage rates again, but hopefully those changes remain small and will not put too much of a dent in the market’s activity.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“House prices are in a state of flux across the country, with the picture changing from month to month. Clearly we are seeing a slowdown in house price growth, but it is more modest than initially expected.
“There has been a £7,000 fall in the average cost of a house since last summer, but this is still much higher than pre-pandemic levels.
“Sales are holding steady for the time being and many estate agents are now able to offer more choice after spending the winter trying to replenish their stock.
“Living costs are still sky high and while this may be especially challenging for first-time buyers, the demand for good quality housing is unwavering and this is propping up prices in parts of the country.
“Buyers must be reassured that now is still a good time to buy. There is still competition for properties, but with prices coming down slightly, buyers may see some wriggle room on the asking price.”
Carl Howard, group CEO of Andrews estate agents:
“Despite a slight dip in house prices in April, it’s still a much rosier picture compared with last autumn.
“Fears of a sustained property slump appear to be being dispelled as other measures of house prices point to an increasingly busy spring.
“With mortgage approvals rising significantly in March, buyers who were previously sitting tight are now feeling more confident and committing to a move.
“Sellers are also willing to be flexible with house prices, which is generating more activity and pushing more sales over the line.
“For prospective first-time buyers hoping for a slump, the market’s resilience may not come as welcome news, particularly while inflation remains stubbornly high. Many will still be putting their property searches on hold to see how the economy springs back.”
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“The Halifax figures pour cold water on the growing fires of optimism that had been lit across the property market in recent weeks. After clinging onto dwindling annual growth for a few months, the figures are now at a tipping point.
“The spring has produced a wave of positive announcements – from mortgage approvals rising for a second consecutive month, to Nationwide’s 0.5% bump in April, and Zoopla’s claim that demand has hit a high for 2023. The RICS residential market survey for March still painted a picture of falling demand, dwindling sales and lower house prices, but there was hope that this could all turn around in April.
“There are still real positives in the market. The GfK confidence index shows that people’s belief in the strength of their own financial position has picked up slightly over the past three months. Meanwhile, the fact we have so far avoided a recession, and the jobs market is holding up, gives people hope – reflected in Bank of England figures which show we’re prepared to spend our savings at a spectacular pace, and take on new loans. Mortgage rates have also fallen significantly from the peak in October last year, which has made a major impact on people’s ability to buy, and how they feel about the affordability of property.
“However, there are still some headwinds, which call into question whether this confidence will endure. There’s a chance that once we’ve spent our savings and racked up new debts, even if inflation falls, prices could remain painfully high. As more and more people reach the end of mortgage deals, and are forced to remortgage at a higher rate, this could put a squeeze on homeowners that has the potential to dent newfound optimism in the market.”
Avinav Nigam, cofounder of real estate investment platform, IMMO:
“The relative stabilisation of borrowing costs and inflation brings some relief to buyers, with house prices fluctuating slightly month-on-month. While this is good news for first-time buyers, the UK still sees a vast population of renters with few adequate housing options, and no viable path to home ownership.
“In what is clearly a stable, but inaccessible housing market, there’s a growing need for professional investors to inject capital into the market, create new rental homes, and improve the energy performance of existing housing.”
