Rapid Decline in House Prices Observed Over a Decade's Worth of Time
In recent months, the UK residential property market has experienced a notable shift, with house prices dropping for the first time since 2011. According to Halifax, this decline equates to a 2.6% annual fall, wiping off approximately £7,500 from the average UK house price, now standing at £285,932.
This downturn in house prices can be attributed to a combination of factors, including rising mortgage rates and the ongoing cost-of-living crisis. Last year, the housing market saw a surge in demand due to high demand and limited supply, but this trend has since reversed.
Kim Kinnaird, Halifax's director of mortgages, led by KPMG, has stated that the "resulting squeeze on affordability will inevitably act as a brake on demand." The average two-year fixed rate mortgage has climbed to 6.54%, according to financial firm Moneyfacts, which may cause mortgage rates to remain high for an extended period, contributing to the decline in house prices.
Despite the current downturn, the depth and persistence of the decline in house prices are hard to predict, as mentioned by Ms. Kinnaird. She added that the high mortgage rates and the squeeze on household finances will continue to put downward pressure on house prices over the coming year.
Interestingly, the volume of mortgage applications held up well throughout June, particularly from first-time buyers. This suggests that despite the challenging economic conditions, some individuals are still pursuing homeownership.
It's important to note that this drop in house prices should be viewed in the context of a market that had seen little movement in prices recently. Before the current decline, there had been little movement in house prices, which highlights the significant shift that has occurred.
Looking ahead, consumer price inflation is expected to decrease in the near term due to potential reversals in energy and food prices. However, the Bank Rate is forecasted to peak over 6%, which may cause mortgage rates to remain high, potentially prolonging the decline in house prices.
In conclusion, the UK residential property market is currently experiencing a significant downturn, driven by economic challenges and rising mortgage rates. While the extent of this decline is uncertain, it's clear that the housing market is undergoing a significant shift.
