House Prices Experience 5.3% Annual Decline, Reports Nationwide


In its latest report, Nationwide reveals a notable 5.3% decrease in house prices over the past year, marking the most substantial drop since 2009. This significant decline has brought the average home value down by £14,600 since August 2022, leaving many observers to ponder the factors behind this decline and its implications for the housing market.

A Closer Look at the Numbers

The typical British home now commands a price tag of £259,153, showcasing a £14,600 reduction compared to the same time last year. This drop in house prices represents a more substantial decline than the 3.8% decrease reported by Nationwide in July. Furthermore, between July and August, the average house price experienced a seasonally adjusted dip of 0.8%, equivalent to £1,675.

Economist’s Perspective

Nationwide’s Chief Economist, Robert Gardner, opines that this downturn is unsurprising, attributing it to the recent uptick in mortgage interest rates. Gardner notes that the housing market’s activity levels have fallen significantly below pre-pandemic standards. Mortgage approvals have hovered around 20% lower than the 2019 average in recent months, and the latest mortgage application data reinforces this ongoing weakness.

A Challenging Year for Housing

The first half of this year has proven to be a challenging period for the housing market. Nationwide data reveals that completed house purchases and sales were nearly 20% lower than 2019 levels and a staggering 40% below the first half of 2021 when the housing market boomed, driven by pandemic-induced lifestyle changes and the stamp duty tax break.

Bank of England’s Role

The Bank of England’s imminent 15th consecutive base rate increase, expected to be a 0.25% hike, is poised to play a pivotal role in shaping the future of the UK housing market. Chris Druce, Senior Research Analyst at estate agent Knight Frank, emphasizes the importance of the central bank’s decision in influencing buyer confidence and market dynamics.

Buyer Behavior and Smaller Homes

As potential homebuyers grapple with the impact of higher interest rates, they are increasingly turning to smaller, more affordable properties. Nationwide’s findings indicate that while transactions across all property types remain below pre-pandemic levels, the steepest decline has occurred in the market for detached houses. In contrast, flats have experienced a less pronounced decrease, and their prices have risen by a comparatively modest 13% since the onset of the pandemic.

Cash Buyers in the Spotlight

While mortgaged homebuyers face mounting challenges, purchases by cash buyers have shown resilience, rising by 2% compared to the first half of 2019. Iain McKenzie, Chief Executive of The Guild of Property Professionals, highlights the sway of cash transactions in the current market, albeit with an expectation of more flexible asking prices from sellers.

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