UK house prices saw their biggest monthly decline in more than two years as growth slowed

Soaring household bills and higher mortgage rates after September's disastrous 'mini' budgets have hit the property market

Home prices fell 1.4% month-on-month on average in November, marking the biggest drop since June 2020, according to an index.

November's decline followed a 0.9% month-on-month drop in October.

Across the UK, annual house price growth slowed sharply to 4.4%, from the 7.2% annualized growth recorded in October.

The median house price in November was £263,788, said the National Building Society.

Mortgage rates jumped following the mini-budget in September, with a hike in the Bank of England's base rate also pushing up borrowing costs, against a backdrop of households weighed down by rising bills in general. Robert Gardner, chief economist at Nationwide, said: “The fall in the mini-budget continues to impact markets, with November seeing a sharp fall in annual house price growth to 4.4%, from 7.2% in October. Prices fell 1.4% month-on-month, after accounting for seasonal effects – the biggest drop since June 2020.

“While financial market conditions have stabilized, interest rates for new mortgages have remained high and the market has lost significant momentum.

“Affordability of housing for prospective buyers and home movers becomes much more difficult at a time when household finances are already under high inflationary pressure.

“The market looks set to remain subdued in the coming quarters. Inflation is set to remain high for some time and bank rates are likely to rise further as the Bank of England seeks to ensure demand in the economy slows to ease 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." 

Mr Gardner said long-term borrowing costs had fallen back in recent weeks and were probably more moderate.

"Given the weak growth outlook, labor market conditions are likely to soften, but are starting from a strong position with unemployment still near 50-year lows," he said.

“Additionally, household balance sheets have remained in good shape, with significant protection from higher borrowing costs, for at least one period, with around 85% of mortgage balances at fixed rates.

"Expanding housing affordability is also a reflection of underlying supply constraints, which should provide support for prices."

Tom Bill, head of UK housing research at housing agency Knight Frank, said: "The mini-budget impact continued to reverberate in November, with the biggest monthly house price drop since the start of the pandemic."

He continued: “Mortgage rates should continue to fall as the effects of the mini-budget sweep across the system, which will calm the nerves of buyers and sellers alike, even as the 13-year period of extremely low loan costs comes to an end.

“We expect house prices to fall 10% over the next two years and the reality of higher rates will bite even more after Christmas. Mortgage offers made before the mini-budget will start to expire putting pressure on prices from 2023.”Jeremy Leaf, north London real estate agent and former housing chairman of the Royal Institution of Chartered Surveyors (Rics), said: “Prices are weaker but could fall furthermore if not for the two backers, strong supply and employment shortages, despite continued concerns over the rising cost of living and especially mortgage payments.

“The problem is not existing sales, which are mostly running, but new business. However, some buyers are returning now that mortgage rates are starting to fall but they are more aware of their stronger position so are negotiating hard.”

James Forrester, managing director of real estate agency Barrows & Forrester, said: "With the economic drag easing in 2023, we expect the property market to perform well."

Nicky Stevenson, managing director at real estate agency group Fine & Country, said: “While further price reductions are expected over the winter, this effect could be partially mitigated by a return to stability in the loan market and more realistic loan pricing. ”

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics. said: “Overall, we expect a peak-to-valley decline in house prices of around 8%, reversing about a third of the gains since the start of the pandemic.”

Jack Roberts, chief executive of house moving platform SlothMove, said: "Mortgage rates have climbed sharply this year, affordability is already stretched and there is a wave of industry action threatening a new winter of discontent." This article was written by EDUKASI CAMPUS. 

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