House prices continue to fall as market cools

The average house price in the UK fell by -0.4% in October – the third price drop in four months, Halifax data reveals.

Prices fell by -0.1% in September and the annual rate of growth has now fallen to +8.3%, from +9.8%.

Halifax says that the average UK property now costs £292,598, that’s down from £293,664 last month.

The figures show that the rate of growth slowed in all but one region in England during October – and there’s a similar slowing trend in Northern Ireland, Scotland, and Wales.

‘Third such decrease in the past four months’

The director of Halifax Mortgages, Kim Kinnaird, said: “Average house prices fell in October, the third such decrease in the past four months.

“The drop of -0.4% is the sharpest we have seen since February 2021, taking the typical property price to a five-month low of £292,598.”

She added: “While the pace of annual growth also continued to ease, to +8.3% compared to +9.8% in September, average prices remain near record highs.

“Though the recent period of rapid house price inflation may now be at an end, it’s important to keep this in context, with average property prices rising more than £22,000 in the past 12 months, and by almost £60,000 (+25.7%) over the last three years, which is significant.

“While a post-pandemic slowdown was expected, there’s no doubt the housing market received a significant shock as a result of the mini-Budget which saw a sudden acceleration in mortgage rate increases.”

Ms Kinnaird also said that homebuyer caution is growing with mortgage approvals and demand for borrowing declining.

‘Mini-Budget mayhem exacerbated house price misery’

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said: “Mini-Budget mayhem exacerbated house price misery, with prices dropping faster than they have in over 18 months.

“And with a recession looming, there’s every sign that confidence is draining from the market.

“The housing market doesn’t always move in a straight line, but clearly a downward trend is developing.

“We’re not getting near the realms of price falls yet, with annual growth still at 8.3%, but given it has fallen back from a peak of 12.5% in June, it would be foolish to rule out significant annual price drops in the coming months.”

‘Demand for rental properties is expected to grow’

Avinav Nigam, co-founder of real estate investment platform, IMMO, said: “As it becomes harder and more expensive to buy, demand for rental properties is expected to grow.

“We are seeing property listings falling by 15 to 20% in some parts of the UK, as uncertainty encourages property owners to delay transaction decisions.

“Meanwhile, many smaller private investors are exiting due to higher finance and regulatory compliance costs.

“There’s a clear opportunity for professional providers of safe, quality and affordable rental housing for the UK.”

‘Higher rates mean higher rents down the line’

Gary Wright, co-CEO of payment technology firm flatfair, said: “Understandably, the worry is how this will affect mortgage holders but studies from the Centre for Macroeconomics and the European Economic Review have clearly demonstrated that higher rates mean higher rents down the line.”

He added: “Existing homeowners are fairly well insulated from any shocks.

“Banks have largely learned their lessons from 2008, there are far fewer unsustainably high-LTV loans in the market, and more than a third of houses are owned outright.

“It’s new buyers who will bear the brunt of rising unaffordability. It drives home the need for a more coordinated package of support for those living precariously in the private rented sector.”

‘New buyer demand falling by a third is worrying’

Phil Tennant, the chief operating officer of iBuyer UPSTIX, said: “The dominant feeling across the market is uncertainty. Annual growth is still healthy but new buyer demand falling by a third is worrying, and this will certainly have an impact down the line. The question is how much?

“While forecasters debate over whether we’ll see a dip of six or 16%, broken chains and collapsing deals are already ramping up, causing headaches here and now.

“Data elsewhere shows that fall throughs in October have doubled. Broken chains, which already affect one in five in the market, will only get worse.”

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