In December, the average property price in the United Kingdom decreased for the fourth consecutive month due to the growing cost of living and increased loan rates.
According to Halifax, December prices decreased by 1.5% compared to November, resulting in an average home price of £281,272.
The bank stated that rising interest rates and uncertainties about how the cost of living will affect monthly household expenses are slowing the housing market.
It anticipates buyers and sellers to “remain cautious” during the next twelve months.
Even accounting for the seasonal slowdown, December’s monthly decline was less than November’s decline of 2.4%. According to Halifax mortgages director Kim Kinnaird.
House price decline
Compared to December 2021, yearly house price growth slowed to 2%. The weakest increase since October 2019, when prices increased by 1.1%.
In addition, it was significantly lower than the 4.6% annual growth observed in November.
Rising interest rates have hurt the housing market. Since December 2021, the Bank of England has raised interest rates nine times. To slow the rate of price increases, generally known as inflation. The current interest rate is 3.5%, the highest level in the past fourteen years.
Even though mortgage rates have decreased since the government’s controversial “mini-budget” in September of last year. They are still higher than they were at the start of 2022.
Ms. Kinnaird stated, “As 2023 progresses, the housing market will continue to be influenced by the broader economic climate. And as buyers and sellers remain cautious, we anticipate a reduction in both supply and demand. With house prices predicted to fall by approximately 8% over the course of the year.”
However, she stated that the average home price remained high, and even if prices dropped by 8%. The average home price would return to April 2021 levels, which would be “substantially above” pre-Covid levels.
Martin Beck, the chief economic advisor of the EY Item Club forecasting organization, stated that the four months of declining prices were “the poorest run since 2008 when the global financial crisis was intensifying.”
He predicted that real estate values will continue to decline in the “foreseeable future,” falling around 10% over the following 12 to 18 months.
He stated that if the Bank of England raises interest rates again in February, borrowing costs could rise again.
“In April, tax increases and a reduction in the generosity of the cap on energy bills. It will compound the impact of cost-of-living pressures on household purchasing power. Meanwhile, consumer optimism is quite low “he observed.
