Last month witnessed a sharper decline in house prices, marking the market’s most sluggish state since 2009 due to a significant drop in mortgage approvals.
Over the past year, property owners saw a 5.3% decrease in their home values, translating to a reduction of £14,600, as reported by the Nationwide house price index.
Prices showed a 0.8% dip compared to the preceding month. The study revealed that an average home’s worth dropped to £259,153, a slight decrease from £260,828 the previous month, and a 5.3% fall from its peak in August of the previous year.
This follows a 3.8% contraction in the yearly house price growth rate in July, further intensifying after June’s 3.5% decline.
Robert Gardner, Nationwide’s principal economist, commented, “Considering the recent rise in borrowing costs, this downturn was expected. The housing market’s activity is notably lower than it was before the pandemic. For instance, in recent times, mortgage approvals have been roughly 20% lower than the 2019 average, and current mortgage application statistics indicate that this trend persists.
House prices have declined by 5.3% from their high in August of the previous year, as reported by Nationwide. However, economists caution that this decline could reach up to 10.5%.
Capital Economics’ senior property economist, Andrew Wishart, commented:
“Considering that mortgage rates are anticipated to stay around their current rates for another year, we predict house prices will keep declining until mid-2024. This means the total decrease in house prices since their peak in August 2022 could go from the current 5.3% to around 10.5%.”
The recent decline in mortgage approvals in July, coupled with the 0.8% month-to-month decrease in house prices in August, underscores the impact the rising mortgage rates are having on the property market.
Given that mortgage rates are expected to hover between 5.5% and 6% over the next year and with a more relaxed supply of second-hand homes, it appears the data from August signifies the beginning of a notable downward trend in property prices.
Moreover, the RICS survey, a prominent predictor of house price movements, aligns with the possibility of house prices decreasing at a comparable rate for at least the upcoming five months.
