Interactive Investor

UK house prices see largest annual decline in 14 years

31st March 2023 07:44

by Myron Jobson from interactive investor

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interactive investor comments on the latest Nationwide House Price Index.

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Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The latest Nationwide house price index offers the strongest indication yet that the wheels are coming off the runaway house prices in the face of rising costs.

“House price growth reversed in March, down 3.1% year-on-year - the largest annual decline since July 2009. The price fall was widespread, with four of the 12 UK regions experiencing a reversal in price growth on an annual basis, with Scotland and East Anglia reporting the sharpest of declines.

“The housing market is off to a slow start this year, but the crucial spring buying season could give us a clear indication of the state of the property market. In spring, home prices tend to rise due to increased seasonal demand, but current indicators do not signal that the season will be a robust one.

“The low inventory of homes could keep prices elevated for longer than forecast, while affordability is likely to remain a challenge. Higher mortgage rates and the cost-of-living squeeze on budgets means buyers can’t afford as much house as they once could. The squeeze is especially acute for first-time buyers, who haven’t built up the equity that allows them to trade up to another home.

“Consumer confidence took a hit following the turmoil in the mortgage marketplace that ensued the ill-fated mini-budget back in September. The reverberations from the fiscal event have waned, and mortgage availability has improved - but rates have stabilised at higher levels, fuelling the affordability burden.

“While the consensus is that house prices will fall this year, it is a more nuanced picture. Property values may indeed fall in very stretched areas, and for other areas, prices may not change very much - if at all.

“The housing market remains a frustrating one for would-be buyers, fraught with uncertainty and unpredictability. The affordability crunch could mean that existing homeowners may wait to list their properties, since many have already locked in lower mortgage rates, creating little incentive to sell and buy again until rates are more attractive.”

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