The HomeOwners Alliance House Price Watch, which aggregates various indices, provides a clear snapshot. Over the past year, there has been a 3.1% decline in annual house prices. Alarmingly, this rate of decline has doubled from the 1.5% fall reported last month. This marks the third consecutive month where the descent has accelerated, indicating a potentially challenging market for prospective buyers.

Furthermore, the volume of housing transactions in July stood at 86,000. This is a 16% drop compared to July 2022 and marks the lowest level of the past decade.

Why are House Prices Falling?

To understand the current scenario, it’s essential to consider the historical context. Since the onset of the COVID pandemic, there was a notable surge in UK house prices. This was largely driven by a combination of incredibly affordable mortgages and buyers who had significant cash reserves. This led to a consistent rise in house prices each year post-2020.

However, the landscape began to shift around a year and a half ago. With the end of inexpensive loans and the ensuing cost of living crisis, the house market began to feel the pinch. Consequently, after years of impressive growth, house prices started to decrease in late summer and have remained negative since July.

The Projection for the Coming Year

Halifax posits that the full impact of the increasing borrowing costs hasn’t yet been realized. They believe that house prices will continue to fall. Their data suggests that the average house value has regressed to the figures seen at the start of the previous year. On a yearly basis, there has been a decline of 4.6% in prices – the most substantial decrease since 2009.

Interestingly, despite the increased interest rates affecting the demand from buyers, house prices have remained somewhat stable. Yet, the influence of higher mortgage costs might soon be more apparent in the market. The consensus is that the market will stabilize once it discovers a balance that aligns with the increased mortgage costs that have been prevalent over the past 15 years.

Regional House Price Variations

When deciding on property investments, it’s often crucial to consider regional variations. The Land Registry offers the most comprehensive regional data. Their statistics from the last year reveal that most areas still experienced growth. The North East and Northern Ireland lead the charge with a 2.7% growth, followed closely by Yorkshire and The Humber at 2.5%.

On the flip side, regions like the South West (-1%), London (-0.8%), and Wales (-0.1%) have seen declines in July. With the Land Registry’s data lagging behind the more current indices, even sharper declines may be anticipated.

Insights from Major Property Indices

It’s always beneficial to gather perspectives from various trusted sources. Here’s what some of the top indices say:

• HomeOwners Alliance: Emphasizes the significant influence of rising mortgage rates on the decline in house prices and market activity. The demand is currently a third lower than the five-year average.
• Rightmove: Highlights a 1.9% decrease in the average new seller asking prices. Yet, they also point out that prices are still 19% higher than August 2019, before the pandemic.
• Nationwide: Notes a softening in the annual rate of house price growth, with the recent rise in borrowing costs affecting the housing market.
• Halifax: Reiterates the fall in UK house prices in August and emphasizes the lag-effect of rate increases on house prices.
• Zoopla: Mentions that the housing market is adjusting to increased mortgage rates, leading to fewer sales and lower house price growth.
• RICS: Indicates a decline in both buyer demand and agreed sales due to rising mortgage rates, leading to an overall downturn in the market.

In conclusion, the UK housing market is undoubtedly in a state of flux. Understanding these trends and keeping a close watch on the indices can help both buyers and sellers make informed decisions. It’s always crucial to remember that markets are cyclical. While there may be short-term challenges, the long-term prospects of the UK property market remain promising.