Annual house price growth in the UK turned negative in February, falling to its weakest level since 2012, according to data from Nationwide Building Society.
The figures showed that house prices fell 1.1% year-on-year in February, marking the first annual decline since June 2020 and the weakest the market has been since November 2012.
The month also saw a 0.5% month-on-month fall, leaving prices 3.7% below their August 2022 peak after accounting for seasonal effects.
This left the average price of a home in February standing at £257,406 down from £258,297 in January.
Robert Gardner, Nationwide’s chief economist, said that the weak data reflected a “cumulative impact of the financial pressures that have been weighing on households for some time”.
He added: “The recent run of weak house price data began with the financial market turbulence in response to the mini-Budget at the end of September last year.
“While financial market conditions normalised some time ago, housing market activity has remained subdued.
“However, conditions should gradually improve if inflation moderates in the coming months as expected, easing pressure on household budgets.
“Solid gains in nominal incomes together with weak or declining house prices will also support housing affordability, especially if mortgage rates edge lower in the coming months.”
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Nathan Emerson, CEO of Propertymark:
“Despite house prices falling, values are still higher than pre-pandemic. Because of this, our member agents recently reported an 80% increase in new sellers entering the market, showing that despite not pulling in as much money from a sale than they would have done last year, sellers still have a healthy appetite to get moving.
“Previously, sellers were able to be more ambitious about the price, but buyers are most certainly now in the driver’s seat and are negotiating hard when hunting for their ideal home.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“These comprehensive and widely respected figures reiterate continuing worries about interest rates and inflation, which are keeping prices in check.
“However, the market is definitely not in free-fall. On the ground, we are seeing more listings and protracted sales so buyers have more choice, are taking longer and negotiating harder when making offers.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Average property prices fell in February as higher mortgage costs, along with the rising cost of living, have an inevitable impact on affordability.
“Swap rates, which underpin the pricing of fixed-rate mortgages and have been falling since the turmoil created by the mini-Budget in September, have taken a turn and moved the other way in the past couple of weeks on the back of expectations of further base rate rises.
“Subsequently, several lenders who launched sub-4% 5-year fixed-rate mortgages have since increased these, with mortgage rates likely to be up and down in coming weeks.
“Borrowers should seek advice from a whole-of-market broker before either taking the plunge or holding off in the expectation that rates will come down further.”
James Briggs, head of personal finance intermediary sales at specialist lender Together:
“House prices have fallen for the third consecutive month from 1.1% to 0.6%.
“With the House Builders Federation warning that the number of new properties completed each year in England could slump to its lowest level since the Second World War1 and as we approach a recession with tighter mortgage availability, it’s likely activity could slow somewhat further in the coming months.
“With the Spring Budget approaching, borrowers will be closely watching for any signs of additional mortgage support to relieve ongoing uncertainty. Whether this comes to fruition is not yet clear.
“Access to specialist lenders who are able to consider personal and financial circumstances will be key for all those hoping to progress with property plans this year, ensuring more people can take that first step on the property ladder.”
Iain Crawford, CEO of Alliance Fund:
“The first annual decline in house prices seen since June 2020 suggests that the pandemic market boom has officially fizzled out, although we’ve seen signs that property values have been normalising for some months now.
“This was only to be expected given the financial strain facing many households, coupled with mortgage market turbulence that followed September’s blunderous mini budget.
“However, the property sector has stood firm all things considered and we’ve seen growing confidence in the market so far in 2023, confidence that will only grow further as inflation eases over the coming months.”
Marc von Grundherr, director of Benham and Reeves:
“House prices have been sky high for quite some time and it’s fair to say that, having flown too close to the sun, they’re now starting to come back down to earth as a result of wider economic headwinds.
“The good news is that this return to normality has been a smooth one so far and we’re yet to see the crash landing that many so widely predicted.”
James Forrester, managing director of Barrows and Forrester:
“The high rates of house price growth seen in recent years simply weren’t sustainable and, in fact, a reduction in property values, however marginal, will be warmly welcomed by those struggling to overcome the high cost of homeownership.
“That said, we’ve seen a strong start to the year where housing market activity is concerned and so those who do want to capitalise on cooling house prices are best advised to act sooner rather than later, as this negative trend certainly won’t last for long.”
Chris Hodgkinson, managing director of House Buyer Bureau:
“While confidence in the housing market remains high, a combination of economic uncertainty, financial instability and increasing mortgage costs are now starting to take their toll where property values are concerned.
“This was inevitable following such an unprecedented boom period and it’s likely that we’ll see further corrections over the coming months, as both buyer and seller continue to find their feet in a changing landscape.
“However, we do believe that once this correction has been made, stability will return and house prices will rebound in the long term.”
Louis Mason, director of London-based mortgage broker, Oportfolio:
“Demand for property in our local area of Putney in South West London was very strong in February, specifically from first-time buyers. This was a pleasant surprise. Prices appear to have weathered the storm in our area. There are very few properties reducing their asking price, and the higher value homes are still selling.
“For the more mid-priced properties, I think sellers have realised that the appetite for purchasing isn’t as strong as it once was so are being more realistic with their asking prices. They do remain strong, however. The base rate possibly reaching its peak has instilled confidence in borrowers.
“People are realising that things are going to get better. We love to see normality returning to the industry, day by day. Lenders are reducing rates regularly and landlords are returning to the market.”
Rohit Kohli, operations director at Romsey-based mortgage broker, The Mortgage Stop:
“Despite the clear headwinds hitting the property market, overall demand for residential property in our area remains robust. Though lower than this time last year, demand is in line with pre-pandemic levels.
“People are far more patient and not in as much of a rush to buy. They are also no longer offering significant amounts over the asking price, and properties are taking a couple of weeks to sell rather than days, much more in line with the norm. Prices haven’t reduced too much, but there is certainly less overpaying.
“Some sellers are not being realistic about the asking price but expect their onward purchase to be lower in price, which doesn’t make sense. Despite nervousness around the base rate, buyer confidence is being lifted, and we are seeing more enquiries for residential purchases.
“Property investors remain nervous with mortgage rates and lower affordability from lenders, which is preventing their numbers from stacking up.”
Sarah Coles, head of personal finance at Hargreaves Lansdown:
“We’ve had the first annual house price fall since the start of the pandemic boom. The question is whether this is the beginning of a gradual and modest deflation, or a bubble that’s set to burst. There’s no doubt we’ll see more falls in the coming months, but overall predictions of drops come in anywhere between 5% and 12%. Unfortunately, it’s getting increasingly difficult to remain optimistic.
“Runaway mortgage rises at the end of last year proved the turning point for the market. After withstanding months of increasingly painful inflation, buyers were at full stretch – and the mortgage market mayhem in the aftermath of the mini-budget was the final straw. We knew from that point that a house price correction of some kind was likely to be on the cards.
“Since the start of 2023. there has been some hope within the market that falling mortgage rates would bring more buyers back, so falls would remain in single digits, and we’d soon be back on track. This remains a real possibility. However, there are a number of factors that could derail this view.
“While mortgage rates are still expected to fall this year, it’s not going to be a straight line. Recent spending and wage figures are raising the spectre of higher inflation lasting longer than had been expected. This would mean the Bank of England pushes rates up further – making mortgages more expensive.
“The market was pricing in a 0.25% rise later this month, but now it has started pricing in a 0.5% rise, so some of the most competitive fixed rate mortgages have been pulled, and some lenders are repricing higher. This doesn’t mean the mortgage market has changed direction completely, but even a small blip is likely to take a toll on the fragile confidence of buyers.
“This is combined with the depressing effect of a stagnating economy and the threat of recession. Buyers who are worried about rising prices and the risk of losing their jobs may well decide that this is the wrong time to take on a huge mortgage and make themselves a hostage to rising rates”
Jack Roberts, CEO of home moving platform SlothMove:
“Rumours of this property market’s decline have not been exaggerated, but now who is going to prevent prices nosediving?
“In the short-term, the move to negative annual growth could be the shock to the system needed to bring more buyers and sellers to the table.
“Many first-time buyers will see it as their window of opportunity opening, giving them a limited time to swoop before the market rights itself. Their biggest hurdle, as ever, will be the affordability gap, but with rents increasing and borrowing levels relatively settled, it could be their moment.
“Meanwhile for some sellers, keen to cling onto gains made during the pandemic, or facing a costly remortgaging, the downward arrow may spur them to reduce their asking prices and make a deal happen in 2023.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“The slowdown in house price growth continues, and though these are some of the worst growth figures in recent years, the readjustment is hardly the crash that some thought was coming.
“Prospective buyers will see this as welcome news, as the last couple of years have seen growth that has priced many out of the market.
“Estate agents are seeing more properties being put up for sale, and with this increased stock comes a fall in prices, as buyers are able to negotiate harder.
“We are forecasting an overall decrease of around 8% this year, but it’s worth noting that even a fall of this size would only put house prices at 2021 levels.
“House prices will remain buoyant so long as the demand is still there. While most first-time buyers are still eager to get on the ladder and escape high rents, the cost-of-living crisis may be pushing them to sit on their deposit for a while longer.
“It is crucial for inflation to be brought under control if we hope to see confidence restored, but sellers should expect that some buyers will be pushing for some flexibility on the asking price.”
Nicky Stevenson, managing director at national estate agent group Fine & Country:
“This fall in house prices moves the spotlight onto spring, which will be a critical bellwether for how the housing market is performing during this period of high inflation and economic insecurity.
“A slowdown in prices in February is not unsurprising given normal seasonal trends, but spring is traditionally busy and we are seeing an increasing number of buyers are being enticed back to the market.
“Data released earlier this week showed the average house price has risen by 20% since the start of 2020, representing a £50,000 rise — an astonishing increase compared to the 7.8% increase in the three years prior.
“A slowdown in price growth is therefore playing a part in drawing prospective buyers back to the market, as they are keen to try to secure a good deal on their next home. An improving and increasingly competitive mortgage market is equally giving people more confidence and is already helping with affordability.”
