The latest Nationwide HPI shows annual UK house price growth slowed to 4.4% in November, from 7.2% in October.
The index also reported house prices fell 1.4% from October, the biggest reduction since June 2020. House prices were also revealed to have fallen by 0.9% in October in the previous Nationwide HPI.
The average price across the UK, according to Nationwide, stands at £263,788.
The industry reacts
Responses to the findings in the index have been wide-ranging. Robert Gardner, Nationwide’s Chief Economist, commented:
“The fallout from the mini-Budget continued to impact the market, with November seeing a sharp slowdown in annual house price growth to 4.4%, from 7.2% in October. Prices fell by 1.4% month-on-month, after taking account of seasonal effects, the largest fall since June 2020.
While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum. Housing affordability for potential buyers and home movers has become much more stretched at a time when household finances are already under pressure from high inflation.
The market looks set to remain subdued in the coming quarters. Inflation is set to remain high for some time and Bank Rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures.
The outlook is uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible.”
Nathan Emerson, Chief Executive of Propertymark, the UK professional body for estate agents, said:
“Our agents report a rebalance within the market as competition for homes starts to slow, so it is no surprise that the house price growth is also slowing in line with this.
This knock-on effect being seen in prices achieved is positive as we need to see this settle in line and a return to a more realistic and sustainable market. However, prices remain higher than last year, and with the Stamp Duty threshold raised, it remains a good time to buy or sell a property.”
Joshua Raymond, Director at online investment platform XTB.com, commented:
“This is the fastest pace of house price declines since June 2020 during the height of the first Covid lockdown. This 1.4% decline in house prices correlates strongly to the mini-budget turmoil when thousands mortgage deals were removed from the market and prospective buyers faced stark rises in borrowing costs. The mini budget was an earthquake for the mortgage sector and these price falls paint that reality in the clearest terms.
Yet the most important aspect now is whether this marks the start of a new downward trend in house prices or is it a short term blip? There is much evidence to suggest the downward trend has begun but perhaps we can expect shallower declines. Average mortgage rates hit their highest levels since 2014, highlighting the increase in borrowing costs. Yet with the BoE predicting that the market is overestimating the scale of prospective interest rate hikes, we might not expect borrowing costs to rise as much as initially feared in the medium term which might help slow the pace of price declines.”
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said:
“The carnage wrought by the mini-budget may have tipped the property market over the edge. The delay in sales being completed means this is just a first glimpse of the horrors that may lie ahead, and it’s looking like the next few months could be something of a nightmare. Prices fell 1.4% in November, their biggest monthly drop in two and a half years.
Kwasi Kwarteng’s ill-fated budget, caused a horrible spike in mortgage rates, which spooked the market, and buyers deserted in droves. Zoopla figures have shown that demand plummeted 44% in the following months.
We’re not seeing anything like the full impact of this in the figures, because on average it takes around three months to complete a sale, so it’s likely to include only around a week of sales agreed after mortgage chaos was unleashed. Even at that point, sales being settled were highly likely to have been funded by mortgages agreed well before everything kicked off, so all we’re seeing is the effect of a sudden and possibly catastrophic loss of confidence.”
CEO of Alliance, the Real Estate Fund, Iain Crawford commented:
“Despite the challenges of economic uncertainty the housing market continues to hold up pretty well, with the latest figures showing prices marginally down when compared to last month. As expected, challenges such as increased mortgage costs and the usual seasonal slowdown at this time of year have started to bring us back to pre-pandemic normality.
Those expecting a housing crash are likely to be disappointed as real estate remains one of the most sensible investments you can make, and even if we see a gradual 5-10% price decline in the coming year – the massive growth seen over the last couple of years should still leave us in good spirits to tackle whatever the coming months may bring.”
Director of Benham and Reeves, Marc von Grundherr, said:
“Further market slowdown is to be expected as a consequence of recent political errors, ongoing economic uncertainty, and the cost of living crisis. A gradual reduction in the rate of house price growth should be welcomed, as this will help the market steadily return to pre-pandemic norms rather than falling off a cliff edge. First time buyers will surely be rubbing their hands.
In many ways London is well-positioned to absorb the slowdown as house price growth has been more subdued in the capital, while Londoners are also better placed to financially stomach the trickier economic landscape we will be faced with next year.”
Managing Director of Barrows and Forrester, James Forrester, commented:
“Whilst a 1.4% drop is the largest fall in two years, and despite many commentators and so-called experts in recent weeks seemingly encouraging meltdown within the property market, the latest figures show we are now merely starting to see a steady return back to pre-pandemic normality. The measured pace back to a balanced market should be celebrated yet also met with the reality that we are not seeing, nor will we see, a housing market crash.
Although we are now seeing a slight reduction in price growth, with perhaps temporary and marginal price decline to follow as the market normalizes again, grinch-like forecasts and fears of a property market crash should be put to bed as fixed rate mortgage costs now reduce as an early Christmas present for homeowners. With dwindling economic headwinds in 2023, we expect the property market to perform well.”
Managing Director of House Buyer Bureau, Chris Hodgkinson, said:
“Once again the signs are clear that we are seeing a housing market with little fuel left in the tank as the challenges of economic uncertainty and runaway inflation take their toll.
What goes up must come down and as expected, the marked decline in buyer demand driven by over-inflated prices has resulted in a current downward trajectory in values to match diluting demand. Many buyers have been faced with increasing mortgage costs and in turn this has applied the brakes to an already stalling market – and so we can expect a tricky time ahead as people struggle with higher all-round costs.”
Anthony Codling, CEO of twindin, stated:
“We must remember that average house prices are still around £47,000 higher than they were at the start of the pandemic and, whilst not all will agree with me, I think it unlikely that all these gains will be completely reversed by the cost of living crisis. We are already starting to see wage growth in some sectors and mortgage capacity (and therefore house prices) are linked to wages. It will no doubt be a challenging year ahead for the housing market but whilst it is starting to take a hit, it has not been knocked out.”
