The average house price fell by -0.4% in September, compared to -1.8% in August, data from Halifax’s House Price Index for September 2023 has revealed.
According to the Index, property prices dropped by -4.7% on an annual basis, compared to 4.5% last month.
The typical home now costs £278,601, around the level seen in early 2022, however, property prices are still up by +1.0% since initial Base Rate rise in December 2021.
What’s more, average prices remain more than £39,000 above pre-pandemic levels.
On a regional basis, it was the South of England that continued to see most downward pressure when it came to property prices.
Kim Kinnaird, director at Halifax Mortgages, said: “Activity levels continue to look subdued compared to recent years, with industry data showing lower levels of new instructions to sell homes and agreed sales.
“Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability.
“Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.”
Kinnaird added: “However, with Base Rate now likely to be at or around its peak, we are seeing fixed rate mortgage deals ease back from recent highs.
“Wage growth also remains strong, which has helped with affordability, with the house price to income ratio now at its lowest level since June 2020.
“Many economists and financial markets predict that Base Rate will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s 2% target.
“Overall, these factors are likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year.”
Reaction:
Riz Malik, founder and director at R3 Mortgages:
“There is more chance of the Government launching HS3 than the property market making any kind of decent recovery this year.
“Lenders are trying their best to stimulate the market but unfortunately that is not good enough.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“There are plenty of properties coming onto the market, but at the moment there are not as many buyers.
“Prospective buyers are keeping their powder dry, watching mortgage rates decrease and waiting for house prices to come down further to affordable levels.
“House prices are decreasing but not by enough to reignite interest from buyers.”
Steven Hargreaves, mortgage and protection adviser at The Mortgage Co:
“At this time of the year, we should be busy, with buyers and sellers wanting to be in their new homes by Christmas.
“It’s a little early to tell what October is going to be like, but currently it’s still not the level of activity we were expecting.
“There appears to be a lack of first-time buyers and home movers.
“Lenders are finding the same and are having to be more lenient with criteria and income multipliers on top of lowering their rates to attract the limited supply of new mortgages out there.
“With criteria changes, lower interest rates and property prices falling, buyers could be back into purchasing mode in October and early December 2023, rather than the usual September and October period.”
Ranald Mitchell, director at Charwin Private Clients:
“The market remains extremely sluggish at the moment, with buyer confidence yet to return.
“There is no shortage of supply, indicating that house prices may need to drop further to stimulate buyer interest.
“Having failed miserably to achieve lending and distribution targets this year, many lenders are gearing up for a full-on rate war.
“Things are going to heat up, and they need to, as the buyers simply aren’t there right now.”
Simon Bridgland, broker and director at Release Freedom:
“The past two weeks or so have seen activity pick up slightly, possibly caused by the Bank of England base rate pause.
“What’s very clear is that asking prices aren’t worth the paper they’re written on these days.
“This week has seen a couple of my clients have very low offers accepted.
“If you’ve got the mortgage finance in place, you’re in a great position right now.
“I think there will continue to be more property available for sale, especially when the January credit card bills start to hit the doormat, adding further pain to already stretched budgets.”
Alex Lyle, director of Richmond estate agency Antony Roberts:
“We are finding that the market has yet to shift into top gear following on from the summer lull.
“The volume of new instructions remains low in comparison to the spring but having said that, there appears real value in the market.
“There are opportunities for buyers who are brave enough not to sit on the fence with an autumn window where competition is more muted and vendors more realistic.
“The hold in base rate has given hope that there’s longer-term stability on the way with regards to mortgages, which should improve the confidence of those anxious about committing to a purchase in the present climate.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“While everyone is on the watch for potential headwinds, on the whole lenders are much more confident in their ability to price products.
“There is much less volatility in the cost of funds than was the case just a few months ago, while there is also a growing feeling that base rate may have peaked.
“Lenders are comfortable and confident in the housing market as a whole – we have not seen a widescale withdrawal of higher loan-to-value products as might have been the case if there were greater concerns about an impending house price crash.
“The slowdown in the pace of decline in September seems to back that up.
“With plenty of evidence of lenders enhancing and broadening policy, it’s another positive sign for the market and bodes well for activity in coming months.”
Alan Davison, personal finance distribution director at Together:
“House prices may have dipped further, but in truth this won’t completely undo the increases seen over the last four years.
“And while recent news of falling inflation may also spark hope for first-time buyers and borrowers hunting for cheaper rates; we’re not out of the woods just yet.
“With the BoE’s next rate decision looming, it’s important not to overlook the opportunities still available to get on the ladder.
“We’ve already seen higher demand from first-time buyers looking for a ‘marathon’ longer-term 35 year or more mortgages; doubling from 15% last year, to 30% so far this year.
“So, whether you’re looking to remortgage, buy for the first time, or even build up your portfolio, speaking to a specialist will ensure you’re in the best position for your individual needs.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“These figures, though historically reliable, look at mortgage approvals rather than completions, while the country’s largest lender doesn’t include cash purchasers either, which make up an increasingly important part of the market.
“Results confirm what we are seeing on the ground – business is bumping along at a new, lower level as buyers and sellers are encouraged partly by expectations of lower interest rates and higher rents making refuge in the lettings market less likely, particularly for those taking their first steps on the ladder.”
Anna Clare Harper, CEO of sustainable investment adviser GreenResi:
“Softer pricing reflects higher interest rates, which have a greater impact on affordability than asking prices. It is also a natural next step after 2022 pricing levels, which were inflated artificially by policies such as the stamp duty holiday and very low interest rates.
“This month’s average house price is still above average prices at the start of 2022.
“Many are asking whether house prices will crash. Unlike in commercial property, where values have fallen by 20-30%, it’s unlikely that we will experience a full house price crash.
“Firstly, this is because housing is a necessity, and overall demand for places to live does not change as a result of the strength of the economy.
“Secondly, 8.8 million (36%) homes in England are owned outright, meaning they will not be affected by higher mortgage interest rates.
“As ever, house-price indices aggregate subtleties in many markets, and in some, for some types of property or in some circumstances, prices will fall more than this, meaning that for investors there are opportunities to buy well.”
Tom Brown, managing director, real estate at Ingenious:
“Despite recent property data indicating a small correction in UK house pricing is underway the sector continues to demonstrate its resilience and popularity in the face of high inflation and higher borrowing rates.
“Nationally, there remains a significant shortage of housing inventory across most locations and price points.
“Consequently, any slow-down in sales volumes from homeowners is likely to be offset by increased demand from renters and investors.
“However, it’s essential to note that the situation is not uniform throughout the country and across all price ranges.
“When analysing opportunities, it is key to understand the underlying subsectors and regional dynamics.
“Taking too broad a view of the market can be misleading. For instance, the institutional housing sector has experienced fewer disruptions compared to the residential sector due to its long-term investment horizon, rental growth and substantial capital inflows.
“With rates forecast to be at or nearing their peak, we maintain a cautiously optimistic outlook and anticipate relative stability in the near future.
“At Ingenious, we leverage our market expertise to offer flexible, cost-effective financing solutions to our clients.
“We source residential opportunities from across the UK solely based on their individual merit, ensuring the best possible outcomes for our clients.”
Megan Jenkins, Partner at Saltus:
“Today’s 4.7% fall in house prices and the overall slowdown in the housing market seen over the last six months raise significant concerns about the retirement plans of many high net worth individuals (HNWIs).
“The Saltus Wealth Index Report, a comprehensive study of 2000 individuals with investable assets of £250,000 or more, revealed that one in 30 respondents were pinning their hopes on their home’s value to fund 100% of their retirement.
“On average, respondents expected their property to contribute 44% of their retirement funds.
“These findings are alarming as relying solely on property for retirement planning is not a recommended strategy.
“The cost of purchasing a new home may eat into funds intended for retirement and the unpredictability of the market may result in the need to sell at a lower price than anticipated due to short-term market conditions out of their control.
“There is also a significant emotional aspect to consider, with an understandable attachment people often have to their homes making it difficult to downsize when necessary.
“The recent decline in house prices and challenging market conditions underscore the importance of diversified retirement planning, particularly for HNWIs.
“Relying solely on property to fund retirement carries significant risk and it is crucial for individuals to have a well thought out and diversified plan that takes into account both the financial and emotional aspects.
“If you are in any doubt about your retirement plans, you should speak to a financial adviser to work on a solution that is bespoke to you and your needs.”
Verona Frankish, CEO of Yopa:
“Today’s buyers are certainly facing a more challenging task when it comes to the cost associated with climbing the ladder and this is evident given the reduction in mortgage market activity seen in recent months.
“As a result, the UK property market is currently treading water where house price growth is concerned, with little change on a month to month basis, while prices continue to sit below the highs seen this time last year.
“However, interest rates have finally stopped climbing and although they remain at their highest since the spring of 2008, this should bring about a boost to buyer sentiments over the coming months.
“All things considered, the market has so far weathered the storm with respect to the wider economic landscape and should continue to stand firm over the remainder of a year.”
James Forrester, managing director of Barrows and Forrester:
“A sixth consecutive monthly fall may seem like cause for concern but what we’re currently seeing is the market readjusting following a sustained boom period that saw house prices driven to record highs.
“This has materialised in the form of a slow but consistent reduction in values rather than the cliff edge drop that many predicted and despite this modest reduction, property values remain substantially higher when compared to the pre-pandemic benchmark.”
Marc von Grundherr, director of Benham and Reeves:
“Higher mortgage rates have been the key contributing factor with regard to cooling house prices and so it begs the question as to just how high they may have climbed if inflationary pressures didn’t force interest rates to climb.
“It’s likely that this reduction in buyer affordability will remain an issue over the long term until such a point that the Bank of England finally gets a grip on inflation.
“However, while market activity may have reduced somewhat, the market is still ticking along and we don’t expect any drastic realignment in house prices to materialise.”
Chris Hodgkinson, managing director of House Buyer Bureau:
“It’s only natural that while interest rates have risen, buyer appetites have diminished and, as a result, we’ve seen the tables turn in respect to the supply and demand balance within the market.
“This isn’t to say that sellers aren’t still achieving a fair price, however, they certainly aren’t benefiting from the feeding frenzy of multiple buyers fighting it out for the same property.
“This means that transaction times are taking significantly longer and those who do want to sell their home at speed will need to compromise on price in order to secure a buyer quickly.”
