In October, the average house price in England and Wales saw a notable decrease of 4.1%, dropping by approximately £15,700 to £362,777. This decline, as reported by the e.surv Acadata house price index, is the most substantial monthly reduction since August 2009, a period marked by recovery from the 2007/2010 banking crisis.
Contextualising the Decline
This downturn isn’t an isolated event. It’s part of a longer trend that has been ongoing for almost 14 months. This trend started from a peak growth rate of 12.7% in August 2022. By October 2023, the annual price change, encompassing both mortgage and cash house purchases, averaged -4.1%, a decrease from September’s -3.4%.
Historical Comparison
To put things into perspective, the current average house price is akin to the levels seen in February 2022, about 21 months prior. This comparison highlights the extent of the market’s shift.
Analysing the Market Dynamics
Richard Sexton, a director at e.surv, sheds light on this situation. Despite the decline, the ongoing lack of supply in the housing market is expected to prevent a drastic fall in prices. Moreover, significant regional variations are noteworthy.
Regional Disparities
The North East experienced the smallest price drop over the last 12 months, at -1.5%, with Yorkshire and the Humber following. Interestingly, in London, the City of London and the City of Westminster saw price increases of 5.1% and 3.6%, respectively, in September.
Market Support Factors
Despite the downturn, several factors continue to support the property market. These include a robust labour market and improved affordability. Potential government measures in the Autumn Statement, like stamp duty relief for downsizers and assistance for first-time homebuyers, could further bolster the market.
Mortgage Transactions: A Lagging Indicator
The e.surv Acadata report also highlights that mortgage transactions are still trailing behind 2022 levels. This lag indicates a lack of demand and confidence in the market.
Exceptional Areas
Despite the general trend, some areas, like the City of Westminster, have seen a significant increase in house prices (13.6%), showcasing the resilience of prime central London locations.
Factors Influencing the Market
The decline in house prices can be attributed to several causes:
- The end of the stamp duty holiday
- Rising interest rates
- Uncertainty surrounding Covid-19
Equity Gains Despite Price Falls
Despite recent price drops, most homeowners have likely gained considerable equity in their properties. Since the start of the pandemic, house prices have risen by nearly £47,600.