House prices drop but show resilience in face of economic storm

The UK housing market continues to display signs of strain, reflecting the broader economic challenges faced over the past year.

Data from Halifax for September reveals a further decline in house prices, albeit at a decelerating pace than previously seen, with a drop of -0.4% compared to the -1.8% observed in August. On an annual scale, property prices have reduced by -4.7%.

However, Halifax added in some context that the average cost of a UK home still stands at £278,601, mirroring the figures from early 2022. So far much of the house price drops have only reduced from slightly bloated levels engineered by the stamp duty holiday during the pandemic.

Interestingly, despite the recent fluctuations, property prices have risen by +1.0% since the Base Rate hike in December 2021.

This indicates that the market, while impacted by various external factors, has shown a degree of resilience in the face of what has been a cost-of-living storm.

With average prices remaining an impressive £39,000 above pre-pandemic levels, the long-term appreciation of the housing market over the past few years is evident.

While demand is naturally subdued as people cope with increased borrowing costs as interest rates level off, hopefully stability will draw people back to the market.

There will be lots of people adopting a wait-and-see approach, but these figures illustrate that if you opted for that approach at the beginning of the pandemic, assuming there would be a house price crash, you would have missed out on a significant amount of house price growth.

For those wanting to buy it is much better to look at your lifestyle needs rather than the broader economic picture if you are in the fortunate position to be able to afford rates in this difficult market.

Regionally, the South of England seems to bear the brunt of the downward pressure on property prices, suggesting that local factors might be exacerbating the national trend in this area.

As we move forward, it’s essential to keep a balanced perspective. While there are evident pressures, particularly in specific regions, the housing market has showcased its ability to weather storms in the past.

The forthcoming months will be critical in determining whether the market stabilises or continues on its current trajectory.

Karen Noye is mortgage expert at Quilter